Why Does Zillow Hate my House?
If you are a real estate geek like me, you are obsessed with real estate valuation. It’s bad enough that I spend most of my day performing real estate valuations for numerous investments, but my passion for real estate sends me off to open houses on Sunday’s just looking. You know it’s bad when the realtors know your name and worse when they give your that disapproving stare of disdain as you ask them for the 50th time, “how long has this home been on the market”?
To be fair, my fiancé and I are in the process of searching for a brownstone in Brooklyn. While we probably won’t be in the market for two or three years, I like to stay on top of pricing and opportunities, so I can jump on any wayward / misinformed price. Plus, I am a real estate nerd. Given this, I am also considering selling my New York City condo. It’s too small for a family, and I haven’t lived in it in three years now. It will make an awesome pied-a-terre when I am 50, but I am not sure I want to keep paying the gap between my rental income and the very large mortgage / ever increasing condo fee. I dread the day when the fee will be larger than my mortgage payment, but its coming.
This leads me to a very real problem. How can I determine the true value of my home without putting it on the market? I work in real estate private equity. To determine the price of an asset, I can call an appraiser, three or four brokers and ask a friend what he might pay. Averaging all those numbers gives me a good approximation of the price of my asset and best of all its free and takes about 10 mins, including idle chitchat.
But what about my home? It has become easier to see what other people have recently sold their homes for. Websites like Property Shark, Street Easy, etc. offer a good real estate detective past sales data of comparable property. The major problem is that I cant tell how their home looked compared to mine, new kitchens, bathrooms, etc, so it becomes rather hard to triangulate on a value. Let’s look at the issues one by one.
Appraisers… I would trust an appraiser to value my house as much as I would trust Bernie Madoff to manage my money. Did you know on many refinances, the bank only requires the appraiser to do a drive by? What the hell is a drive by? How can an appraiser tell me what my house is based on by not even taking one step into my home? Additionally, appraisers use historical comparables sales data as their #1, #2 and #3 valuation metric. It’s why they are always low when the market is hot and high when the market is awful.
Brokers… Given the spectrum of people they deal with, they like to err on the side of insanely optimistic. Where the appraiser will either be high or low, you can guaranty a broker will always be high. I wish I could strike a deal with a broker where if they didn’t sell the house for the first quote they gave me, they would be forced to buy it from me or pay me some kind of “liar’s penalty.” I understand their motivation, after all, if they tell me a low number, I am likely going to keep renting the property and they will get nothing anyway. Too bad they can’t pay their mortgage with my respect and admiration.
Phone a Friend… I am always shocked at how little people know of the real estate market, often parroting the latest sound bites from the Wall Street Journal or the New York Times. Aside from that, no one wants to tell their friend that their home is worth 20% less than they paid for it or worse. Still, this is likely the best option.
All of that leads me to Zillow, a non-biased (or so they say), algorithm that somehow takes a walking tour of my home when I am away and gives me a value of my home. It is also kind enough to update me every 30 days with the steady, albeit, depressing decline of my home value. Strange, since home prices are increasing like crazy in my area. The problem? I live in New York City. There are literally hundreds of homes on each block and every building is very different. Some are pre-war, beautifully, renovated buildings, others are shiny state of the art new construction and still others are shabby 1950’s crap. And they could be right next door to each other. On my block alone, there have been sales for $800 – $5000 / sf.
Additionally, while Zillow can see my house, it can’t seem to see my doorman or the building specific new renovations or the fact that I am right outside of the entrance to Central Park on the positive side. On the negative side, it can’t see that my unit gets very little natural light, sits next to the trash compactor on a low floor with no view and needs several touch up renovations on the interior.
Zillow chooses to make an example of my home and prices it 5 – 10% lower than it should. Given Zillow’s influence, can I sue them for libel? I am a minority; is this a hate crime?! Or is Zillow just an algorithm that works well in areas where there are a lot of very similar homes frequently transacted, if that area even exists? You be the judge, I am going with libel, hate crime…Related posts:
Fatal error: Call to undefined function related_posts() in /home/splend10/public_html/bloodhoundrealty.com/BloodhoundBlog/wp-content/themes/in3d-10/index.php on line 46