Lies, Damn Lies, & (Real Estate) Statistics — Cont.
CoreLogic says its estimate is within 10% of a sales price for between about 55% and 75% of homes, depending on the region. Zillow’s estimate is within 10% of sales price almost half the time.
–“Housing Statistics Hit Rough Waters“; The Wall Street Journal (Jan. 8, 2011)
Well, that’s one way to put it.
That the odds of CoreLogic’s home price estimates being off more than 10% are between 25% and 45%.
In practice, that means if you have a $500,000 home, there’s approximately a 1-in-3 chance that CoreLogic will peg the value above $550,000 or under $450,000.
Zillow’s numbers are even worse: over 50%(!) of the time, it would over/undershoot the same $500,000 home by more than $50,000.
And that’s just what each company actually admits to (cue, The Wall Street Journal).
As they say, “your mileage may differ.”
Margin of Error
Nobody would trust a poll whose margin of error was that wide.
Any scale or gas gauge that was consistently off that much would be tossed in the garbage.
Yet I continue to encounter homeowners who present me with their “Zestimate” (or similar) as if it was written in stone.
In fact, such home estimates are based on (very) incomplete and stale data — none of which includes little details such as a home’s floor plan, updates (or lack thereof), and over all condition.
Realtor “Value Added”
By contrast, a locally expert Realtor not only knows all those things, but they have their pulse on current market conditions.
In truth, saying that a good Realtor can price a home much more expertly than Zillow et al is to understate matters; that’s because the Realtor also knows how to increase a home’s value, by strategically prepping and staging it, then showcasing its strengths to prospective Buyers (which they also know how to attract).
When you consider that they — we — do all that for around 6%, suddenly . . . hiring a good Realtor looks like a pretty good deal.