You can’t trust Zillow and its property value estimates, or ‘Zestimates’ as they like to call them. Although Redfin offers a more user-friendly interface and seemingly superior estimates, its numbers should also be taken with a grain of salt.
Zillow was a game changer when it launched in 2005, offering property valuations right at your fingertips. It became a fun tool for snooping on the value of your own home or even your boss’s place. But many of Zillow’s initial estimates were wildly inaccurate, although homeowners could correct this by logging in and updating their home’s details.
Zillow does help buyers become more informed by revealing what a house last sold for and its history. This transparency was a shift from the days when only real estate agents and paying customers had access to such data. There was hope that Zillow could help streamline the market, cutting out unnecessary intermediaries and reducing the typical 5-6% selling commissions. Unfortunately, this hasn’t happened.
One major issue with Zillow stems from its business model, which is heavily reliant on advertising revenue from realtors. This means its interests may not always align with providing the most accurate home valuations. Zillow’s zestimates often say more about what’s beneficial for Zillow and its advertisers than about actual market values. A home, after all, is only worth what someone is willing to pay for it, not what an online estimate says it’s worth.
Zillow’s revenue primarily comes from fees it charges real estate agents for leads and advertising. They’ve also delved into buying and selling homes themselves, which puts them in direct competition with their users, potentially skewing their objectivity.
The biggest gripe I have with the real estate sector is not the untrustworthy agents or dubious valuation methods—it’s the staggering 5-6% selling fees that homeowners are burdened with. It’s absurd that selling a home can cost tens of thousands of dollars more simply because the home’s value is higher. Zillow and similar platforms should have worked to dismantle these high costs, but they haven’t.
Moreover, Zillow now offers a service where you can sell your home directly to them based on their zestimates, which may well be lower than market value to serve their profit motives. This can lead to homeowners selling their properties for less than they’re worth, demonstrating another reason why Zillow’s estimates can’t always be trusted.
In an ideal world, the real estate industry would shift to a fixed-fee model that doesn’t disproportionately penalize sellers of higher-valued homes. My proposal is a $2,000 fee for every $100,000 of home value, capping at $20,000. This would make selling costs more reasonable and equitable across different property values.
In conclusion, while Zillow offers a convenient way to peek at the market, its zestimates should only be one of many tools used in property valuation, and definitely not the deciding factor.
