How much is your co-op or condo apartment worth? The answer will depend on whether it comes from a professional appraiser, a real-estate broker, a city tax assessor, or a potential buyer. And then there’s the online real-estate marketplace Zillow, which has collected data on more than 110 million American homes and offers its own estimates of market value, called “zestimates.”
Barbara Andersen is not a fan of zestimates. Andersen, a real-estate lawyer in Illinois, is suing Zillow, claiming a townhouse she’s trying to sell is worth $626,000 and that Zillow’s zestimate of $562,000 misleads buyers and creates a “tremendous roadblock” to a sale. The suit argues that Zillow should be licensed to perform appraisals and should be required to obtain the seller’s consent before postings zestimates online.
Jonathan Miller, of the appraisal firm Miller Samuel, argued in Brick Underground that a zestimate “implies a precision that it does not possess.” He added, “It could be really accurate, slightly off, or really off – and the consumer can’t tell.”
The Zillow website carries this disclaimer: “A zestimate home valuation is Zillow’s estimated market value. It is not an appraisal. Use it as a starting point to determine a home’s value. The zestimate is calculated from public and user-submitted data, taking into account special features, location, and market conditions.” Zillow also uses a proprietary formula to arrive at the final number. In New York it has a median error of 6.3 percent, meaning that half of the zestimates were within 6.3 percent of the final sale price, and half were off by more. Nationally, zestimates are within 20 percent of the final sale price 85.4 percent of the time.
Zillow says it has produced zestimates on five million homes in New York City, including an eight-bedroom Manhattan condo overlooking the Hudson River that’s listed for $85 million but has a zestimate of just $53.7 million. On the other hand, a Marine Park, Brooklyn, co-op that’s on the market for $165,000 has a zestimate of $442,635.
Andersen’s lawsuit against Zillow has delighted many appraisers. Pat Turner of Richmond, Virginia, told The Miami Herald: “They’ve been playing appraiser without being licensed for years and doing a bad job. It’s about time they got called on it.”
And maybe it’s about time to update an old adage. It’s no longer just buyer, beware. Now it’s buyer and seller, beware.