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How Bad Are Zillow “Zestimates”?

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Re: How Bad Are Zillow “Zestimates”?

#191

Post by honkhonkpants »

r0m4n0 wrote: post #185
honkhonkpants wrote: post #52

Earlier quoted context omitted.

The job of the appraiser is to write down a number as large as or larger than the amount to be financed. They know this and they know the number in advance. What they do is not rigorous.

Definitely not true... there are many checks in place to ensure this doesn't happen http://www.freddiemac.com/loanadvisorsuite/loancollateraladv... http://www.freddiemac.com/loanadvisorsuite/faq/loancollatera... This doesn't even take into account the process for appraisal management companies (third parties).

You seem to think these industry controls are effective. Maybe they prevent an appraisal from being, say, 10x higher than the recent sale prices on either side, but they don't prevent the equally bad event of a series of 10 sales on the same block each being 10% higher than the previous. Every one of those houses in Las Vegas that turned out to be worthless in 2007 was appraised for at least the sale price the year before. The appraisers in those cases didn't do a damn thing, for example they didn't come out to the house and write down "this neighborhood is in a desert with no access to water where the unemployment rate is 20% and the employed people make minimum wage therefore this cannot be a neighborhood of $850000 houses." They just said "the last house sold for $800000 and this market seems pretty hot so $850000 okey dokey."

Re: How Bad Are Zillow “Zestimates”?

#192

Post by r00fus »

amyjess wrote: post #168

I'm still scratching my head and wondering what Zestimates mean for rentals. For example, I'm giving serious thoughts to moving to SoCal, and I see a place that looks pretty nice... it's listed as being $2000/month, but then when I go to the listing it says Zestimate $2650/month. What's up with that?

Is $2000 within the rent range? Is it a duplex? Seems like Zillow data is far more accurate for single family homes.

Re: How Bad Are Zillow “Zestimates”?

#193

Post by EpicEng »

honkhonkpants wrote: post #131
EpicEng wrote: post #123

Earlier quoted context omitted.

That has not been my experience at all, and I'm pretty sure lenders would have a big issue with that if it were as rampant as you say.

What incentive does the lender have? The involved parties are the seller, the buyer, their agents, and the originator of the loan. All of these people are working to close the deal at the negotiated price. The originator of the loan will hold the loan for somewhere between 72 hours and 30 days, so they don't care.

Of course they care; any money they give you over the value of the home is unsecured! They're not going to lend you e.g. 20k @ 3.5% with no collateral. C'mon.

Re: How Bad Are Zillow “Zestimates”?

#194

Post by smsm42 »

spydum wrote: post #182
smsm42 wrote: post #172

Earlier quoted context omitted.

It's kind of scary that million dollars' decisions (and in aggregate, probably billions) are made on the basis of solely "let's look what others are doing and then fudge it based on gut feeling until it looks kinda plausible" and that's supposed to be expert verdict. Not that I can offer any better idea :)

Haven't you just described 90% of the VC investments made in startups in the last few years?

Well, I guess it depends. Some investors do a lot of due diligence before investing, ask for financials, plans, market analysis, etc.

Re: How Bad Are Zillow “Zestimates”?

#195

Post by wheelerwj »

tomohawk wrote: post #190
wheelerwj wrote: post #125

Earlier quoted context omitted.

This is how it USED to be done, and was a significant contributor the housing bubble that lead to the recession. It's different now, not necessarily less subjective but the incentive for creative appraisals has been drastically reduced. Prices have to be justified and mortgage brokers can't interact with the appraisers now. Apprasing has to be entirely separate from the underwriting process and is now entirely blind.…

The separation part only sounds good. However, if you get an incompetent appraiser, there's literally nothing you can do about it. It's also hard to weed out the incompetent ones, as they are now independent from their customers. We got an incompetent on our last deal. Couldn't find the house. Misidentified the street. Couldn't find the electric panel. I could go on. Took several weeks to get the appraisal done, and…

ya, i understand. but that sounds like a very different issue.

Re: How Bad Are Zillow “Zestimates”?

#196

Post by EpicEng »

leereeves wrote: post #121
robbyking wrote: post #93

Earlier quoted context omitted.

In the late 90's I worked for an online mortgage broker, and 9 times out of 10 when we ordered an appraisal, the appraiser would ask us what the selling price was and return an identical figure for their estimate.

Amazing that people still pay for that.

Apparently you've never actually taken out a mortgage.

Re: How Bad Are Zillow “Zestimates”?

#197

Post by EpicEng »

DennisP wrote: post #158
JamesBarney wrote: post #154

Earlier quoted context omitted.

Usually a buyer has already agreed to buy a house at a certain price. So if the appraisal comes back low, the seller doesn't lower the price. Instead the buyer just doesn't get a loan so they don't get to purchase the house they had their heart set on.

A friend of mine saved $15K on a house because the appraisal came in low. If the bank won't write a loan for the agreed price, the original contract is void, since it's contingent on loan approval. If the seller's heart is set on moving, he might well lower the price.

Sure, just depends on whether or not there are other parties who will pay the Delta.

Re: How Bad Are Zillow “Zestimates”?

#198

Post by pigpigs »

brentm wrote: post #157
acdha wrote: post #109

Earlier quoted context omitted.

Zillow deserves a fair share of the blame because they prominently feature a single number with dollar-level precision and bury the caveats multiple clicks away on a separate page. Some basic UI changes could avoid all of that: e.g. instead of showing $123,456, show a range like $115,000-135,000, and keep the last few digits at zeros based on their estimated error rates. Similarly, their graphs could use shading to m…

> Some basic UI changes could avoid all of that: e.g. instead of showing $123,456, show a range like $115,000-135,000 So true. When you know that you are not displaying an exact dollar amount you should not use exact dollar values. Exact dollar values afford exactness even though the branding is an estimate.

This might very well backfire on them. The buyers will want to buy at the lower price and the seller would want the higher price. Both parties end up being unhappy even if the end price was within the given band.

Re: How Bad Are Zillow “Zestimates”?

#199

Post by shostack »

joeax wrote: post #75
drewbuschhorn wrote: post #12

I bought a home last year, and each realtor I talked to brought up how terrible Zillow was before I ever mentioned it. If you look at the WaPo article all the comments are by other realtors, so I'd take those comments with a grain of salt. Oddly, my mortgage guy never looked at Zillow (that I saw) for figuring out values, so shrug . I'm sure the data is inaccurate, but it's somewhere to start the conversation and let…

My bro-in-law became a real estate agent a couple years ago. Recently we were discussing Zillow, and he went into a tirade about how terrible it is. I just mentioned that it's a good tool to gauge the price trends of my neighborhood, but he began countering with canned, carefully scripted responses that sounded like indoctrination from his broker/employer. I just sighed, before the topic turned to how important it is…

What were the arguments for the 6%? There is a broker in the Bay Area who advertisers that they take half that but the complaints against them see to point to the fact that you'll only get offers from other affiliated agents, and many agents won't share the listing with clients if they can avoid it because they want their full commission.

I'm the Bay Area I feel like a seller's agent is grossly overpaid for what is often a weekend of open house showings and then fending off multiple above list price zero contingency offers.

Re: How Bad Are Zillow “Zestimates”?

#200

Post by shostack »

jedberg wrote: post #127

> If you excluded trust sales and probate sales or family-to-family type Quit Claim transfers (where the property is transferred at a considerably lower value from its market value) shouldn't the Zestimate reset to the exact amount of the property's last sold price? No, it should not. My personal example: When I bought my house, I bought it for 20% less than what Zillow said. But Zillow would have been right on the m…

I thought you could create an account to claim your home and add info about updates to boost your estimate?
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