The Trouble With Zestimates and Zillowconomics

Few things tickle my rather dark and twisted funny bone like announcements like these from Zillow’s “Chief Economist” when discussing the nation’s hottest buyers and sellers markets. Here’s where the fun is …

Zillow analyzed data on sale-to-list price ratio, number of days listings spent on Zillow and percent of homes on the market with a price cut, and ranked the 50 largest metro areas to determine whether buyers or sellers have more negotiating power in a given market.

So, in short, if a house isn’t on Zillow then it doesn’t exist for purposes of Zillow’s “Chief Economist”. To me, this is like only tracking the blue houses or the ones with gray roofs in determining whether the current market gives more leverage to buyers or sellers; it’s incredibly arbitrary and, call me crazy, probably below the standards of an economist trying to analyze data.

Many of us individually spend a considerable amount of time explaining to buyers and sellers why the “data” provided by Zillow should be taken with enough grains of salt to drop a sodium-addicted deer in his little tracks. In markets such as Phoenix, such a small percentage of homes actually are listed on Zillow that any resemblance Zillow’s “economic” discoveries have to reality seem to be mostly luck.

I guess it would be nice if Zillow, in keeping with its claim to be the world’s bestest online real estate portal, had all the listings but to be honest, that’s not my problem nor the problem of any of my real estate peers. We aren’t the ones who started a company founded on bogus home valuations and then promoted the listings available on the site without securing access to said listings. And call me crazy, “we built it so you have to give us all your listings” is kind of a stoopid argument.

(If you want to read more about Zillow’s latest fun effort to coerce blackmail partner with MLSs around the country to get the listings, check out the splendiferous Kris Berg on the San Diego Castles blog … a brief sample …

Apparently, the argument du jour is that by simply going to the source — the MLS’s — Zillow’s pesky problems with data integrity can be readily solved. And so they could. My own future earnings could also be greatly enhanced if Nordstrom simply shipped me their entire fall line so that I might set up my own little marketplace on eBay. But, I am smart enough to know that they wouldn’t just send me their stuff for free. Nordstrom would probably want something in return.  It’s crazy, I know.

And since I mentioned those bogus property valuations …

One of the oldest – and weakest – arguments from defenders of Zillow, both within and outside the real estate community, is that consumers know the Zestimates are starting places and any agent worth his salt (I feel an artery clogging just from the references) can explain the difference between a Zestimate and, say, reality.

This is one of the reasons defenders of Zillow argue for mass syndication of listings, regardless of the imaginary Zprice Ztag Zillow places on the home next to the real list price. Just because Zillow makes a home seem overpriced doesn’t matter because we can overcome that objection.

That assumes the opportunity arises. Remember the scene from When Harry Met Sally pictured above (no, not THAT scene. The one at the football game.) Picture a buyer as Bruno Kirby and the listing agent as Billy Crystal. Or vice versa, it still works. And we’ll say the action on the field is a Zestimate and not a football game. Because one individual took the time to talk to another individual about the given property, understanding was reached. All while doing The Wave.

Meanwhile, while these two are talking, this was going on around them …

Sure, an agent can explain the problem with a Zestimate to the one person who asks. But how does he possibly explain the fiction that is a Zestimate to the thousands of people looking at the disparity online who make zero effort to reach the listing agent … or any agent for that matter … and simply assume their version of reality is the truth?

This holds true for almost every sporting event, by the way, because fans see with their heart and not their heads. By the same token, buyers look at Zestimates if not with their heart then in a borderline irrational manner if only to support their own desire to get a “deal” on a house.

As listing agents, and as agents in general, we have zero defense from the misconceptions that arise from legitimate buyers viewing hallucinatory information and not ever talking with an agent about the reality – or not doing so until they’re absolutely certain that the mythology they read is in fact a work of non-fiction.

Should the big Z really want to partner with agents to ensure data accuracy, this probably would be the place to start. But it doesn’t make for nearly as sexy as story as the one that goes “those big bad REALTORS hate the public.”

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About Jonathan

Jonathan Dalton is a 30-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

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