Zillow: where it works, where it doesn't
Zillow's been around for less than two months now. It seems longer.
Here's some expectations regarding Zillow.
1. Zillow does better in some areas than others. They're quite good in urban California, and can be downright crappy in small towns. They somewhat acknowledge this, by the range they report. In small towns, the range can be over 1:1.5. This isn't a lot of information.
2. Zillow has no magic source of information. If you finished your basement, Zillow doesn't know that, and it won't be reflected in the value presented.
3. Zillow does worse in areas where the assessed value is erratic. This includes more places than you might think. In states with high real estate taxes, a lot of people are given a break on the assessed value, while others are not. Out of state landlords, not. Grannies, the max. This results in Grannie's house being underestimated.
4. An important portion of the data which Zillow bases its estimate on is flawed. It's usually not totally nuts, but there are a lot of little flaws. These flaws can easily affect the estimate by 10%, but often they're detectable. Two side by side houses, very similar, one estimates 10% higher than the other. But, whoa, that one shows 5% more square feet. Now if you know that they're the same size, you can adjust accordingly. Sometimes square footage was reported by overly exuberant realtors.
5. Real estate appraisal in illiquid markets is nearly impossible even for professionals. Zillow can't do it either. Illiquid markets come to exist in areas with very few bank financed sales, and none of those financed > about 70%. Some vacation markets are illiquid. Some rural markets are illiquid. Sales prices are all over the map in these markets. Shrewd cash buyers with no realtor involved can buy at under 50 cents on the dollar as compared to seller financed risky deals. How you going to appraise? Erratically. That's why the usual sources of financing avoid such areas.
6. Anone who thinks that the real estate industry earns $60k from the typical $1m house sale is on the receiving end of part of that $60k.
Here's some expectations regarding Zillow.
1. Zillow does better in some areas than others. They're quite good in urban California, and can be downright crappy in small towns. They somewhat acknowledge this, by the range they report. In small towns, the range can be over 1:1.5. This isn't a lot of information.
2. Zillow has no magic source of information. If you finished your basement, Zillow doesn't know that, and it won't be reflected in the value presented.
3. Zillow does worse in areas where the assessed value is erratic. This includes more places than you might think. In states with high real estate taxes, a lot of people are given a break on the assessed value, while others are not. Out of state landlords, not. Grannies, the max. This results in Grannie's house being underestimated.
4. An important portion of the data which Zillow bases its estimate on is flawed. It's usually not totally nuts, but there are a lot of little flaws. These flaws can easily affect the estimate by 10%, but often they're detectable. Two side by side houses, very similar, one estimates 10% higher than the other. But, whoa, that one shows 5% more square feet. Now if you know that they're the same size, you can adjust accordingly. Sometimes square footage was reported by overly exuberant realtors.
5. Real estate appraisal in illiquid markets is nearly impossible even for professionals. Zillow can't do it either. Illiquid markets come to exist in areas with very few bank financed sales, and none of those financed > about 70%. Some vacation markets are illiquid. Some rural markets are illiquid. Sales prices are all over the map in these markets. Shrewd cash buyers with no realtor involved can buy at under 50 cents on the dollar as compared to seller financed risky deals. How you going to appraise? Erratically. That's why the usual sources of financing avoid such areas.
6. Anone who thinks that the real estate industry earns $60k from the typical $1m house sale is on the receiving end of part of that $60k.
posted by dwshelf at 8:51 AM
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