Ryan Ackerman of The Ackerman Group real estate firm recently represented the owner of a home at 1541 Harbor Cay Lane on Longboat Key priced at $2.45 million. But Ackerman had a $250,000 problem: Zillow valued that home at $2.7 million.
“The owner kept coming back to Zillow’s estimates and saying we were pricing his home too low,” Ackerman says. “Zillow has become a frame of reference in real estate for buyers starting their search and sometimes for owners assessing the value of their homes. But the truth is that Zillow’s estimates are often wrong, sometimes wrong by a lot.”
Zillow has transformed the real estate business since its founding in 2006. The company has data on more than 110 million homes in the United States. Zillow’s estimates, or “Zestimates,” as the company refers to them, have been a source of contention for years. The website realestatedecoded.com contends that the “typical Zillow Zestimate error is $14,000. But you don’t know if it’s $14,000 too high or $14,000 too low. And it gets worse because half the time Zestimates are off by more than $14,000, sometimes a lot more.”
Zillow is under new scrutiny after a family of homebuilders in Illinois filed suit in May, demanding Zillow take down its Zestimates in Illinois and pay damages. It has since been refiled as a class-action lawsuit, giving it a much wider scope.
Zillow responds that its estimates are not appraisals and should not be taken as such. Nevertheless, the company says the estimates for most homes are within 5 percent of the sales price. Zillow is also offering $1 million to anyone who can significantly improve the algorithm from which Zillow generates its estimates.
That does not appease real estate professionals such as Ackerman, who contend that he has seen local properties that Zillow has over- or under-valued by 30 percent or more.
“One of the main problems is that Zillow does not take into account improvements a homeowner may have made to the interior of the home,” he says. “It’s just not an accurate tool to arrive at value. It penalizes homeowners in all kinds of ways.”
Xena Vallone, president of the Realtor Association of Sarasota and Manatee, says the organization has not taken a formal position on the Zillow lawsuit. But she agrees with Ackerman that Zestimates can be an inaccurate way to value properties.
“Zillow is a marketing website,” Vallone says. “It’s not something to be relied on.”
Taxable property valuations continue to increase in Sarasota and Manatee counties. Here are the total valuations filed in July and how they compare to the previous two years:
2017 $54.6 billion
2016 $50.4 billion
2015 $46.6 billion
2017 $33.2 billion
2016 $30.6 billion
2015 $28.2 billion