In the field of Real Estate, we are often presented with challenges while trying to offer as much information to our clients in order to help them make the most informed decision. Being a Houston Realtor for over 14 years, I have seen a pretty substantial transformation in terms of the exchange of housing information among all parties involved in home buying and selling process. In addition, I have served on many committees and task forces for the Houston Association of Realtors (HAR.com) where I have gained valuable insight, broad knowledge, and appreciation for real estate technology and what a consumer is looking for when purchasing or selling a home. While I treasure the insight and experience passed on to me by other Realtors who have been in the business for decades, my favorite stories are the ones regarding how information was exchanged many years ago. It was standard practice for potential buyers to drive through neighborhoods looking for “For Sale” signs or have their Realtors visit the local association office where listings were posted on a board. The Realtor would then call to make an appointment and go pick up the keys. At that time, the only information available was either from public record or from the agents knowledge of the home. When I entered the real estate field in 1995, the Houston Multiple Listing Service (MLS) had just introduced the ability to upload a picture to show the front of the home on the internet. Almost 20 years later, HAR.com is now an amazing consumer tool to help clients sift through homes, pictures, and, most importantly, relevant and accurate information regarding a sale or purchase. Along this amazing journey, we have seen the rise of other real estate aggregator sites such Realtor.com, Trulia and Zillow join the online community.
While many consumers see them as the same, there are very big differences between them. First, let’s start with Realtor.com. The URL, or website address of Realtor.com, is owned by the National Association of Realtors (NAR). Presently, the website is hosted and developed by Move, Inc. under an operating agreement with NAR. In most cases, housing data is fed to the website directly from the local associations which ensures a very high level of accuracy in the data. While there is some latitude to make some changes on the site, most major changes have to be approved by the governing NAR body. This ensures that Realtor.com remains a relevant consumer focused site while still adhering to basic rules and suggestions by NAR.
Next, let’s look at aggregator sites like Trulia and Zillow. These sites predominately obtain their data from feeds from real estate associations, but also other avenues of data feeds including broker websites, listing promotion services, newspapers and more, which leaves them extremely vulnerable for incorrect and outdated information. In addition, these aggregator sites struggle with other problems such as poor mapping, duplicate data, and other data errors. While each site has some type of quality control program to correct listing errors, the basic consumer is led to believe the data on theses sites is correct which leads to the main focus of this article.
Even though several of the real estate aggregator sites struggle with accuracy of the data, incomplete or incorrect data alone should not be of great concern until it reaches the point of giving a consumer a false expectation of price or future value. The most well know inaccuracy on an aggregator site is found on Zillow and called Zillow’s Zestimate. This feature attempts to assign an estimated value on a home to a consumer. While they have made some changes to their valuation model, this feature remains highly inaccurate and gives consumers a false expectation of a homes value.
In my research report Zestimate Accuracy, I have compared the Zillow Zestimate with three other indications of price: sales contract price, appraisal amount, and the Realtor’s RPR valuation model. You can clearly see there is a significant difference in the values depending on the source. Of the examples, the only one that is available to the consumer is the Zestimate. In my professional opinion, the sales contract price – an agreement between a buyer and a seller and the appraisal which is done by a trained professional – are the most accurate indicators of value. It could easily be said that a mere Zestimate or any automated indicator of value poses no real danger for a consumer, but I assure you it does in several ways. The first problem is that since it appears on a well known site like Zillow, most consumers accept it as the gospel. This can pose a significant barrier when trying to establish the real value to a buyer that believes the Zestimate is the more reliable number.
The second problem affects a seller is who is working with a Realtor. The seller sees their house advertised at their desired price with an inaccurate Zestimate on the same page thereby ruining the credibility of the sales price established by their Realtor. While a homeowner can provide Zillow with data to change the Zestimate, it should not be anyones job to correct a publicly displayed value.
The last problem displayed on Zillow is the estimated forecast of home value. One of the core ethical principles we as Realtors are taught is to never give someone the idea that you can predict what the home will sell for at a later date. Questions as simple as “Will I be able to sell my home for the same price in 5 years” should not be answered. Consider all of the buyers in the states that experienced a housing bubble who did not rely on an estimated forecast of value from a website only to be financially ruined when an unforeseen economic meltdown occurred. Now, imagine how much greater the catastrophe would have been if buyers had flooded the market or made purchasing decisions based on an estimated forecast from a website tool.
I realize there are a variety of tools on the real estate aggregator sites, but without accuracy and legitimacy, they are misleading, and a prudent consumer should know these limitations before entering the market or making a purchasing or selling decision. While many might think this is just a commercial for everyone to use a trained Realtor to help them establish a true value on a home, this is more to bring to light and point out how our local real estate site HAR.com is the most accurate and up to date site for consumers looking to buy or sell. While HAR.com might not have all the bells and whistles as some of the other sites listed in this article, it does maintain the most accurate, up-to-date, reliable, and dependable data for consumers out there online. HAR.com also has a talented team of web developers that are constantly looking for ways to add more value for consumers. Not only is HAR.com directly fed from the Multiple Listing Service (MLS) system, it is also one of the only sites that has a policing mechanism to ensure accurate data and conduct of all its members. I have served on the MLS fine committee for several years and have personally observed fines being implemented on members who have knowingly inputted inaccurate data or who have attempted to fraud the consumer on some level.
In closing, I appreciate the efforts to make more data readily available to a consumer and encourage all sites to be as transparent as possible especially in a robust housing market we are currently experiencing. When a consumer utilizes the most accurate data available to them in their housing needs in combination with the knowledge and experience of a Realtor, it can make the sale or a purchase of a home incredibly effective and efficient.