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How to Zap the Zestimate
When it comes to home valuation and the often criticized Zestimate® automated value model, Zillow is not your friend. We’ve all heard our sellers champion their number and question ours. Frustrating? Yes. Yours is a culmination of your market knowledge and experience, carefully constructed from relevant, recent comparables. You consider all the nuances of the seller’s property and those included in your comparative market analysis (CMA). Zillow’s, by comparison, is consumer click bait generated only by algorithms scouring the public record and sporadic public input. I can assure you, yours is more accurate. But from an uneducated seller’s perspective, you are but a lowly agent and not the mighty Zillow. Heck, what would you know after all? :)
Okay, let’s go slay a dragon as we learn to Zap the Zestimate®.
a: to get rid of, destroy, or kill especially with or as if with sudden force b: to hit with or as if with a sudden concentrated application of force or energy c: to irradiate especially with microwaves
Well, we’re not zapping with microwaves but tools equally as powerful to educate your seller … definitions information, visualized numbers and a great CMA.
Let’s begin with the understanding that a Zestimate® is simply an Automated Valuation Model (AVM), a name given to any service that provides property valuations using mathematical modeling combined with a database. Mathematical modeling simply means programmed algorithms and database here means all the publicly accessible records of past property sales.
Zap Tool #1 – Algorithms are not magic
Explain to your seller that algorithms are nothing more than quantified human opinions; they are neither magic nor fool proof. Emphasize the human here as to err is human. Their valuation extrapolation indicators were created by committee of ‘experts’ in a city far, far away then computerized for simplicity. Real estate valuation is not simple.
Zap Tool #2 – Garbage in – Garbage out
Further explain that Zillow, by only accessing public data records as some user input as the basis for their Zestimate®, does not have a window into all the nuances and granularity of local property descriptions. Remind them that your tools are superior because you have access, as a localized professional and member of your local MLS, to highly detailed and current property information. Zillow cannot assess the overall condition of a home, consider surrounding properties impacts, account for deferred maintenance, evaluate floor plans, see firsthand the outdated kitchen or hear the relentlessly barking canine next door. This list of items Zillow cannot see is almost endless and you’ll create many more to add to your list. It’s fun watching your seller’s facial expression change from Zillow-loving to Zilllow-doubting while using Zap Tool #2. :)
Zap Tool #3 – In Their Own Words
Now confirm the power of Zap Tool #2 with Zap Tool #3. This is Zillow’s own description of the accuracy of their valuation product. This response is from their advice thread on Zillow.com;
For your reference, I would like to note that the Zestimate is an estimate derived from our proprietary algorithm. The data included in this algorithm include physical attributes, tax assessments, and prior and current transactions. The Zestimate is simply an estimate using the best information available to us. Please know that we do not intend for the Zestimate to replace a comparative market analysis as they can take into account market intricacies that the Zestimate cannot. The Zestimate is really meant to be a starting point in determining a home's value and is not an official appraisal. To learn more about the Zestimate, we encourage our users to follow this link.
Kinda’ say it all, doesn’t it. It’s not a replacement for a CMA after all.
Zap Tool #4 – They're Just the Popular Kid
Concede that Zillow has certainly popularized the AVM through great consumer marketing but then explain that they are only one of many AVMs available. And just because they’re popular, it doesn’t make them right. Your seller will typically not be aware of other options and will want to know more. So now we will show them more as the final Zillow Zap.
Zap Tool #5 – Visualized Numbers
We can could call this tool “A Graphic Presentation of Divergent Home Values from Multiple Automatic Valuation Models” but let’s let not be too pretentious and agree to just call it “Show ‘em the Numbers!” I do want to emphasize that it’s important to take the time with a recalcitrant Seller to create a visual model. It’s impactful as you lay out your case to Zap the Zestimate®.
So here’s a real world example to display how Tool #5 works. Do a little valuation research on your subject property, then get on www.piktochart.com or www.canva.com or similar and build your own graphic presentation to present to your seller. The subject property shown in the graph is an actual active listing at $284,900.00 at the time of this writing. Similarly, the AVM numbers were gleaned online as of the same date.
Here are the valuations I found while building the graph:
And here are numbers presented visually …
On our example valuation, suggested home values ranged from a low of $186,851.00 from Eppraisal.com to a high of $359,750.00 from ForSaleByOwner.com . Wow! If this doesn’t display to your Seller why they should rely solely on your competence and expertly crafted competitive market analysis it may just be time to move on to a different Seller!
Tool #6 – A Great CMA
Here’s where we can really shine with our sellers. We have a fantastic tool which Zillow and the other AVMs simply can’t compete with when it comes to a detailed, thorough and justifiable estimate of value. Called a Competitive Market Analysis or Comparative Market Analysis by others, the CMA is our tool. And nothing less than a full appraisal could possibly be more accurate if prepared correctly with the inclusion of relevant comparable sales data. And here at Real, we’ve integrated the Cloud CMA service right into the Real App. Cloud CMA is connected to your MLS to include the right data and packages it all in an easy to create and impressive valuation presentation for your Sellers.
So take the time and educate your seller exactly how you constructed your CloudCMA and with what data as compared to the AVM’s simplified, high level bed / bath / square footage / lot size analysis. Real and CloudCMA are far superior.
AVMs Should be Welcomed
I actually relish when a potential listing client surfaces their Zestimate® or other AVM pricing. It provides a perfect opportunity to educate them as to the how real estate valuation really works while I can display my knowledge and competence.
So don’t fear Zillow or any other AVM for that matter, just zap them with these six easy to use tools. Nobody prices homes better than professional agents. And with Real and Cloud CMA you’ll stand head and shoulders above any AVM. Period.