Zillow: FirZt ImpreZZionZ

February 9, 2006

Enough with the Z's already! All I can say is Zowee! (sorry) Can you believe the data gathering and data base building for this? And then the presentation. An amazing effort by Zillow. My first impressions were immensely positive. Here's a screenshot of the search results page:



Very cool!

Now, lets get under the hood.
First, it appears the data base is built from public records. Not bad, just not reliable. Public records are notoriously fraught with error and incomplete. Even in our area (Loudoun County, Virginia) where Zillow rated the data quality 5 stars, properties I searched only showed tax records from 2003. What happened to 2004 and 2005? The best data from tax records (in addition to the address) are the lot size, assessed value and sold price history when the deed transferred. Information about the features of a home (e.g. bedrooms, finished levels and square footage) are often missing. Although Zillow offers a mechanism to adjust, I found their categories lacking and when applied to one of our real listings, the valuation resulted in an absurdly high value.

Next, the current valuation is computed from history and appreciation trends. This might be good if you are looking at cookie cutter homes in a large subdivision with a lot of activity. Unreliable in areas with low turnover and uniqueness. A good example of this is in a neighborhood consisting of primarily custom homes. Zillow consistently valued older (built 5 to 10 years ago) higher than what they recently appraised and ultimately sold. Here's a snapshot of value trends:



Finally, tax records are not always updated in a timely manner. And, using tax records cannot provide any current information about the state of the market or the current condition of the property. An analysis of MLS records exposes current market conditions. An agents experience and first hand knowledge of a property can adjust the potential value that Zillow will not be able to do. Here's a snapshot of the detail:



Initial conclusions: Zillow gets an A+ for the data gathering effort and presentation. The Website is nicely designed and easy to navigate with simple explanations that are consumer friendly. I give it a D for accuracy on the small sample I took (my current listings). Zillow consistently overvalued (sometimes by more than 10%) our homes. I suspect that since Loudoun was such a hot market for the last 24 months with annual assessments rising 25 to 30% a year, Zillow paints an optimistic picture.

Consumer warning: Go ahead and use it. It is free and easy. Remember, beta means it is still being tested and tweaked. Zillow warns of that. Will I use it? Probably to get another data point. I use three methods to get to value range now. One of them is assessed value and appreciation rates. I tell our clients it is the roughest of all of our analysis, a rule of thumb. Zillow will not replace an experienced agent. I worry consumers will get enamored with the reports and zestimate and make some wrong decisions about listing price, especially when Zillow provides an optimistic value range.

I like it for its amazing build and presentation (I think these things are cool anyway). I'll continue my data analysis approach using MLS data. Priceless. And, not worry Zillow will replace me anytime soon (or ever).

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