Two years ago on Briercliff Drive, the homeowner and myself hit it off immediately at our first meeting. He was an east coast surfer from the 1960’s who came from a real estate family and had lived in Downtown Orlando for nearly 30 years. It was obvious that his home was well cared for and he spent an hour walking me through his yard, explaining all the exotic plants, how they’d come to find this seed or that plant, and telling me why they were special. I gave him a home value estimate of what his home could sell for and we made a simple plan to stay in touch and list his home in the Spring of 2019.
Like a lot of Orlando homeowners, my new friend watched the real estate market closely, and over the past several years had come to rely on the Zestimate® as an indicator of what his home might be worth. While historically inaccurate, the Zestimate® is certainly convenient, and has simply been an additional piece of objective information for everyone in the market to consider. Something changed a few months before we planned to list my surfer friends home however, and The Orlando Sentinel published an article with the headline “Zillow will start buying Orlando homes directly this year”.
If you’re wondering why a real estate website would want to purchase homes, then you’re not alone. Plagued by a declining number of consumers, complaints of inaccurate information, and a dwindling revenue from real estate agents ads, Zillow® is scrambling to generate new revenue streams by flipping homes they purchase for less than market value. Competing with companies like OpenDoor® and “We Buy Ugly Houses” type folks, Zillow® has thrown their name into the “ibuyer” market to try and buy homes cheap from presumably distressed or uninformed homeowners.
After reading that Zillow® would be a potential purchaser for homes in our market, a simple question popped into my head.
Is Zillow® using the Zestimate® to deliberately mislead homeowners by tricking them into thinking their home is worth less than it really is?
The idea sounded far fetched to me, and it’s hard to imagine that any company would be greedy enough to deliberately take advantage of people like my friend, just to make a few extra bucks. Then I remembered the Enron case that I studied in a white collar crime class at Florida State University, and I remembered cases of how publicly traded companies can be persuaded to do some pretty manipulative things when stocks take a dive. Zillow Group, which trades on the Nasdaq exchange under the symbol ZG is down nearly 13% over the past 6 months while the general real estate market is performing very well.
So I decided to do a quick case study with my friends home in Downtown Orlando to test my theory out. On February 21, 2019 at 4:39pm, I took a picture of the Zestimate® that Zillow® was displaying to the public before I listed this home for sale, and the number was $309,774.
Fortunately my friend didn’t sell his home to Zillow® or rely on the Zestimate® for information about his home value. We listed 1103 Briercliff Drive for sale on a Thursday afternoon for $369,000 and received a Full Price, Cash Offer, on Saturday evening. The home closed in 2 weeks and I’m happy to say that this was a record breaking sale in the neighborhood.
Moving forward I’m bothered by a different question:
“After being in business for 13 years, is it scarier to think that Zillow® is deliberately valuing homes 14% below their value or is it scarier to think that this is as good as they can get at estimating values?”
I might never get the answer to my questions about why Zillow® is displaying horribly inaccurate information about homes in Orlando, but I can offer an alternative to my neighbors, friends and family. If you ever have a question about how much a home is worth in our market, just give me a quick call at 321-377-0341 and I’d be happy to provide you with an accurate number. – Don Harkins, REALTOR®