As a licensed Realtor in Oakland County, I find myself educating a lot of people. And, when I go out to speak to homeowners in Oakland County and investors throughout the Metro Detroit Area, I am often questioned about my professional opinion on the market price of a home because it will often differ from what is being presented by Zestimate on Zillow.
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CHANGE YOUR MINDSET
I don’t get upset because Zillow is very popular and I was an educator, so I like educating people. I have found that some of the Zillow tools are very misunderstood by the public, especially the Zestimate. The first thing I want you to do is to change the way you think of Zillow. Zillow is a great source of information, but not all of it is accurate. Therefore, I want you to think of Zillow in the same manner you think of Wikipedia. It is a good starting point to learn about a subject, but should not be taken as indisputable facts.
ZILLOW’S OPINION OF ITS OWN TOOL, ZESTIMATE
Zillow’s Zestimate is very much like the monkey wrench the technician is going to use to put the lug nuts back on; the tool was not designed to support the task it is being asked to complete. Zillow has a page on its website that describes how accurate the Zestimate is for 25 top Metro Areas. Zillow lists the Detroit Metro Area Zestimate tool as being 2 out of 4 stars accurate. Zillow says this means the Zestimates provided are a “Fair Assessment.” How many of you go to Amazon and say, “NOPE! I don’t want the four-star product, I’ll take the 2-star product?” Anybody? I don’t think so, unless we are talking about sometime as trivial as napkins or paper plates and not your house.
But, do you really want to put your trust into a mathematical algorithm that the creator rates as “Fairly Accurate?” Your home is one of your biggest financial assets. Would you sign a mortgage if the mortgage company said, “it’s fairly accurate that your monthly payment will be $1000?” Most people would say no. Then why would anyone trust an estimate tool that is giving you the same message as that hopefully nonexistent mortgage company?
ZILLOW SELF REPORTED STATS
Zillow says for the Metro Detroit Area it has 1.8 Million homes on the site and 1.7 million of them have Zestimates.
41.1% of transactions in the Metro Detroit Area for which the Zestimate was within 5% of the transaction price.
64.4% of transactions in the Metro Detroit Area for which the Zestimate was within 10% of the transaction price.
82.3% of transactions in the Metro Detroit Area for which the Zestimate was within 20% of the transaction price.
It’s overall median error percentage is listed as 6.4%
CONVERTING THE ZESTIMATE ERROR PERCENTAGE INTO DOLLARS
So I am going to convert that error percentage into a Dollar value for an Oakland County Homeowner thinking of selling their home and using Zestimate solely as a pricing guide.
To do this simply, multiply the percentage error (hint, convert 6.4% to 0.064 by dividing by 100, for example) times the median home price in Oakland county ($207,000 for December 2016, CrainsDetroit.com) to get the typical dollar error for Zestimates in Oakland county. So, if the median error is 6.4% and the median price was $207,000 then the typical dollar error for Zestimates in that county would be $13,248 (0.064 x $207,000 = $13,248).
So if you perform the calculations, at intervals of $50,000 up to $707,000, your typical Zestimate dollar error has increased to +/- $45,248.
The significance to the seller is:
- The seller may be overpriced by $19,648, which could lead to the house sitting for a longer period of time or not selling at all.
- The seller is under priced by $19,648, which means the seller gave the new buyer $19,648 on top of whatever concessions they agreed to.
So, how do you know what the price should be?
|TYPICAL $ ERROR||$16,448||$19,648||$22,848||$26,048||$29,248||$32,448||$35,648||$38,848||$42,048||$45,248|
IF YOU’RE THINKING OF SELLING GET IN TOUCH WITH MARVIN MORRISON
This is why you want a Realtor to assist you in selling your home. This is why you want me, Marvin Morrison. If you are thinking about selling your home, let me show you how my marketing plan can get you the most money possible and get your home sold quickly. I can be reached at 248-394-3446.