This story is taken from Sacbee / Business / Real Estate / Home Front
Home Front: Appraisal sites on Net often fail to pin down accurate prices
jwasserman@sacbee.com
Published Friday, Aug. 13, 2010
One of the most phenomenal new developments in real estate over the past five years is the ability to look up your home's approximate value online.
Since Zillow.com launched in February 2006, millions of people now turn to keyboards and mobile phones, punching in home addresses. Here again, the digital revolution freed data from experts and democratized it for the masses.
A number of companies now compete for the eyeballs of homeowners, and the advertising they sell. If you don't like Zillow's free estimate of your value, you can get another at Cyberhomes.com, or another at Eppraisal.com.
But here's the question: How accurate are these sites, really? These are computers talking back at you. They assign your house a value without seeing it and without knowing the neighborhood. Then they hedge their bets with a price range of $20,000 to $40,000 on either side of that value.
Seattle-based Zillow doesn't claim to be right on the money. But the firm's chief economist, Stan Humphries, said Thursday, "Our accuracy in the Sacramento metro is very good." He said "roughly half of homes sold in the metro sell for within 10 percent of the Zestimate." That's Zillow's trade word for estimated values.
Despite that contention, some appraisers and real estate agents hold dim views of Zillow and competitors.
"All these data sources are OK for basic tract homes that have no upgrades or are in average condition," said Colleen Tiner, who owns Tiner Appraisals in Fair Oaks.
"But when you get anything that's off average Zillow doesn't apply at all."
These online sites, powered by what's called automated valuation models, have the hardest time in irregular neighborhoods.
If you live on the nicest street of an average neighborhood that's bordered by a declining neighborhood, the free sites can appear to toss darts at the wall.
An acquaintance in this situation in Sacramento County got three values ranging from $99,000 to $217,000.
Humphries acknowledged that Zillow's accuracy improves with "the proximity of comparable homes."
Agents do praise one thing about Web estimates. They educate clients, said Frederick Kuo, broker associate with Prudential NorCal Realty in Carmichael.
"I feel like the greater wealth of information has actually helped me with some clients. They have a more realistic understanding of the market and the process they'll be going through as a buyer," he said.
His complaint, though, is about actual values, and Zillow's in particular. Judging by sales prices, Kuo believes the site "tends to be about 20 percent over actual values" in both newer, homogenized neighborhoods and mixed older ones.
Computers see houses objectively, said Tiner. She said, "We have the experience to estimate the subjectiveness to an appraisal."
That's old-fashioned shoe leather that goes beyond algorithms. It's about knowing neighborhoods, seeing the remodeled kitchen and knowing what a view of the lake is worth.
Zillow's Humphries said computers can learn.
"Our computer models train themselves daily as new information, such as home sales or user-contributed facts, becomes available," he said Thursday.
Zillow claims 12 million visitors monthly. Yet a home's real value always comes down to the oldest formula on Earth: what's agreed to in a handshake.
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