You're doing Zillow wrong, and driving your agent crazy

INDIANAPOLIS -- There's no nice way to say this. You're driving your real estate agent crazy.

When you look up Zillow's estimate for the house you want to buy — which the company calls a Zestimate — and demand that the seller give you a lowball price because of Zillow, you're driving your agent crazy.

When you insist on selling your house at an exaggerated Zestimate, you're driving your agent crazy.

When you completely ignore a Zestimate because it doesn't favor you? You guessed it. Crazy.

Here's what I'm saying: You're doing the Zestimate wrong. Real estate agents don't want to tell you this because they need your business. But I can tell you that when you adamantly stick to Zillow's online pricing tool, regardless of how much evidence suggests it's wrong, you're making real estate deals harder.

Zillow acknowledges the national median error rate for its Zestimate is 7.9 percent. That performance is worse in Indiana because housing data isn't as easily accessible here as it is in other states.

"We always tell people, if you're really going to sell your house, you need a professional real estate agent who knows all about your local area," said Emily Heffter, a spokeswoman for Zillow. "We've never been in your house."

Nonetheless, many buyers and sellers treat the Zestimate as gospel.

John Wake, a former economist who created his own housing price algorithm before becoming a real estate agent in Scottsdale, Ariz., said that's a mistake. Wake has studied Zillow's estimates and determined they offer a nice "ballpark value," but typically are off by more than $10,000.

I asked Wake how the Zestimate has changed clients' approach to buying and selling real estate.

"Oh my God," he said, the pain evident in his voice. "You could talk to any real estate agent and they go nuts."

I bring this up because Zillow is no longer the only pricing estimate available in Indiana. Online real estate brokerage Redfin this past week expanded its own pricing model, called Redfin Estimate, to the state. Redfin is providing estimates for 14,338 properties in Indiana and says its median error rate in the state is 1.89 percent.

That should make Redfin's estimates more accurate for Indiana properties than Zillow. But it also raises the likelihood that buyers and sellers will become even more reliant on often incorrect estimates.

Like Zillow, Redfin emphasizes that its estimates are guides, not tools that should determine sales prices.

"It's a great starting point for someone to say, 'What is my home price?' " said Karen Krupsaw, vice president of real estate operations for Redfin. "Talk to a real estate agent. There are sometimes individual pieces of an individual home or neighborhood where it's smart to investigate some of those details."

Seattle-based Redfin won't reveal the algorithm behind its estimates, but Krupsaw said the company generally uses "comparable sales in a neighborhood and all data associated with those homes that are available to us."

She added that Redfin Estimate is a "great tool" for homeowners and buyers. But it's still important to at least consider factors unknown to websites such as Redfin and Zillow.

"A good real estate agent is going to go in with a very analytical approach to pricing a home," Krupsaw said. "They're going to take a look at recent activity in the neighborhood in addition to the seller's home and updates they've made that we can't account for. So there are a number of detail points that an agent is going to make."

Donna Kreps, the president of the residential division for Indianapolis real estate brokerage F.C. Tucker Co., said it's generally easier to persuade sellers than buyers that their favorable online estimates are wrong.

"It sometimes impedes (buyers') ability to negotiate with a seller because they see (a house) as being a lower value than it is in the marketplace," Kreps said.

Although pricing estimates have armed both buyers and sellers with a starting point, Kreps said the popularity of the Zestimate has complicated real estate transactions.

"Somebody has an expectation, and we have to fill in the gap for where that expectation is," Kreps said. "There's more information available to consumers, but they don't know what to do with the information."

Zillow and Redfin explain that their models are limited and often inaccurate. Do your real estate agent a favor.

Believe them.

The Indianapolis Star


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