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...But Zillow says it's worth $573,000

Many real estate agents hate Zillow.   But not for the reason you think.  When Zillow was launched a couple of years ago the word on the street was that agents would lose their usefulness in helping sellers determine their home's value.  That turns out to be far from the truth--which is that agents have to spend an awful lot of time explaining Zillow's  inaccuracies.

Here's the beef.  Zillow is a huge aggregator of data.  They use info uploaded by real estate agents (not always accurate), tax assessment data and comparable sales.  Then use a proprietary formula to calculate a "Zestimate."  But they have no way of accounting for hyper local conditions, for example, a house that has not been updated for 50 years. Or a house that backs up to a gas station.  Or a house with a fabulous view (that the house next door may not have because it's blocked by trees).  These are factors that only a human being with local expertise can work in to the house value equation. In fact Zillow's self-reported level of accuracy in the Northern New Jersey Market is a median error of about 12 %.

In other words, half the houses sell for within 12% of its Zestimate.  And the other half do not.

Only 25% of homes sold for within 5% of the Zillow estimate.  That means you can count on Zillow to be really accurate only about a quarter of the time!

When Zillow is wrong, it can be really wrong. Take this house in Glen Ridge which recently sold for 380,000.  Zillow's estimate was 573,000.  Can you imagine the agent trying to convince the seller that despite what Zillow says the house is actually worth almost 200,000 less?  Here's what Zillow didn't know about this house.  It needed extensive repair and was owned by a bank that wanted to get rid of it as fast as possible.

The take away is that no computer can substitute for a careful assessment by a qualified human.  While Zillow may work well for communities that have a very homogeneous stock of houses (think Levittown), it does not work as well for towns like Montclair and Glen Ridge where a two million dollar home is often a block or two away from a four hundred thousand dollar home.

On the bright side--isn't it good to know that human experience and judgment still beat out the computer?