The amusing part to me, is when I clicked on it, directly under the asking price is the Zillow Zestimate: $396,500. Yes, you read that right, Three hundred ninety-six THOUSAND, five hundred dollars.

Now, I realize Zillow’s algorithms have what they claim to be somewhere between a 7-11% margin of error, but this one is off by 88.27%. OFF BY ALMOST 90% OF VALUE. Hm. Think something might not be right?

Yet Automated Valuation Systems are the way banks are doing quick appraisal reviews, and no wonder they may be coming in low.

I’ve discussed the Zillow Zestimates in the past, beginning with Zillow Zestimates for Towson Real Estate May Be Misleading. I have come across a large number that were not close to a selling price of a home.

Then, I had communications with some Zillow executives, where some light was shed on why it is possible they are off in our area, which I discussed in Misleading Towson Zillow Zestimates Explained Further.

Zestimates started to complicate things further as the market began to drop, because banks began to reduce Home Equity Lines of Credit, and were using Desktop Valuations to do so. When one of my clients called his bank, his loan officer pulled up Zillow & told him that’s why it had been dropped. (See Incorrect Towson Zillow Zestimate Strike Again.)

Earlier this year, Zillow updated their Algorithms to try to correct some of the problems. For the Baltimore metropolitan area, according to the site’s “Zestimate Accuracy,” Zestimates are within 20% of an actual sales price only 78.3% of the time (with a 7.9% margin of error).

For a $200,000 house, being 20% below would bring the price down to $160,000. Above, that price (which would make a seller happy, but not a buyer or appraiser), would be $240,000. That’s a tremendous difference!

Real estate is very local. Even street-by-street or neighborhood-by-neighborhood within a zip code can have majorly different values.

If you would like an accurate Towson home value estimate, please contact me. I can help you anywhere in the Baltimore real estate market area, or if you are in a different state, I can refer you to an agent anywhere across the country.

A mortgage that is underwater means that the value of the house is less than what is owed to the mortgage company by the homeowners.

The national average of homes underwater is 27%, so Baltimore homeowners are faring a little better than others.

The Baltimore Business Journal shared the data from Zillow.com with these numbers from the end of 2010.

Baltimore house values dropped 9.7% in the fourth quarter, with the national average dropping only 5.9%, which is a larger negative number for Baltimore homeowners.

The drop in house values is good for Baltimore homebuyers, who may be able to get a great home for a lower price than they would have paid in the past and will pay in the future.

If you are considering buying a home in Baltimore, contact me, because now is the time, before the market recovers for sellers. Take advantage now!

Appraisals done by people in general are both objective and subjective, which means that often if you had two professional appraisers come to your house, you would likely get two different price opinions, if they did not have a target price to go from.

Computerized appraisals are just that. It uses transactional data information but does not take updates and other ancillary details into consideration. According to the Wall Street Journal article by M.P. McQueen,

Automated valuation models were pioneered by Yale economist Robert Shiller, who developed the first systems in the early 1990s. While arguing that these appraisals are more objective than human appraisers, Mr. Shiller and others say that in some situations the models may be providing unrealistically low values, prompting lenders to reject loan applications or lend less money on particular properties.

I have to question as to whether the data is similar to those used by Zillow Zestimates to find value. Baltimore County Zillow Zestimates have been well off in many situations, and the disclaimers on their site are many. Their CEO & CFO explained their data issues to me, and I discussed them in my post about misleading Towson Zestimates.

If owners have tax credits or have lived in the property for a long time, that can easily skew results, creating an incorrectly low “appraisal” or Zestimate.

So, if you are looking to refinance your Baltimore County home, be aware of computerized appraisals.

Though I have my issues with Zillow and the very incorrect Towson Zillow Zestimates, it is still an honor to be nominated for best Baltimore real estate blog, and even more so to have the voters choose my blog to win!

The race was very tight between myself and Jamie Smith-Hopkins from the Baltimore Sun. To have it be a close one between a full time professional writer and myself made it even more exciting to me!

The night before the final votes, I had been down a lot, and thought the contest was over. I used Twitter and Facebook to put a call out for help — and my online friends and “fans” came through to help me win with 46% of the votes!

It shows how powerful these social media sites are, and what connections you can make and relationships you can build.

I want to thank each of you who voted and got the word out to vote for me, and the amazing amount of support I received. I am overwhelmed and grateful.

THANK YOU!

Don’t forget to contact me for your Baltimore real estate needs. I am here & ready to serve!

I am proud to have been nominated, and the hard work I put into my Towson real estate blog is being noticed.

You can vote every day until August 11, 2010 at midnight, so please stop by daily (click the photo to take you to the poll) and vote for me!

Either way, don’t worry, I will continue to provide in depth Towson real estate information, as well as activities and homes for sale in Hunt Valley and surrounding areas!

I appreciate the nomination, despite my issues with Towson Zestimates and their inaccuracies. The site has many great tools, but close valuations in our area is not one of them.

Thank you for your continued support and readership. If you have any Baltimore real estate topics you would like to see me cover, please contact me!

35 Chesterfield Court in Monkton, Maryland

This very large Colonial home at 35A Chesterfield Ct in Monkton on 6.46 acres, is a GREAT deal at $635,000!

Per Zillow’s Zestimate, its’ value is approximately $696,500! Now, Zestimates are an approximation, and are not an appraisal of true value, and can be off a lot in our area, but they give you a general idea of a starting point as to what a property may be worth when using statistics and history.

So enjoy this great deal, and come visit us at the open house on Saturday, October 3,  from 3-5 pm!

I like to know my Towson real estate marketplace so when I am asked how much a home is that someone passed on the way to my house, I know the answer.

One family member who lives not too far away, said he went on Zillow to find out how much his home is worth. He is not selling anytime soon, and didn’t want to “bother me”, but couldn’t believe that his home was worth over $210,000 less than he bought it for just 2 1/2 years ago.

Now, a neighbor’s house is on the market for $624,900. This area is very diverse, much like Towson, so the neighbor’s house is much smaller, with significantly lesser acreage. It’s Zestimate? $440,500. $184,400 difference (30%!).

This brought me to show them my past posts about Misleading Towson Zillow Zestimates and the one about how my past client’s HELOC was reduced based on the very incorrect Zillow Zestimate on his home.

Pulling two homes that are on the market near my Towson home (that he passed, and yes, had asked me about), I found one listed for $2,495,000. Zestimate? $971,000. Over $1.5 MILLION difference (39%!) The smaller one down the street from there? On the market for $615,000, Zestimate $489,000. (20% difference).

I wrote about it on a Realtor website called ActiveRain to find out if others are having similar issues. I also sent the information to my two contacts at Zillow. Responses have been that the site is very off in areas across the country. The one contact at Zillow, David Gibbons, stated in an email to me:

“It appears as though the Zestimate values for unique homes in this area that have not recently sold (like this one) seem to be driven largely off the tax values. For some reason, this homeowner pays incredibly low taxes (half that for homes selling at $2M.) I’m pretty certain that that is why our estimate is indeed off…”

Again, this emphasizes that real estate truly is LOCAL. However, if a site is designed to helps consumers determine values, shouldn’t those values be SOMEWHAT accurate?

If you would like an accurate Towson home value estimate, please contact me. I can help you anywhere in the Baltimore real estate market area, or can refer you to an agent anywhere across the country.

Last week I had a client call me because his HELOC was reduced by a large amount right in the middle of construction to improve his home. He could not understand how the bank could make the determination that his Towson house value had dropped over $200,000 in the past 18 months since he opened his HELOC.

Upon speaking to the bank, the representative pulls up Zillow, and proceeds to tell him this is how they discovered the value change.

“Is this true? Has my value really dropped by THIS much? I knew we were in a depressed market, but did not think it was THIS bad,” he asked me.

Based on a true market analysis, his value has really only dropped by $25-50,000. So how is Zillow off this much?

Enter the powers of social media!

I was able to find both the COO & the Director of Community Relations for Zillow on Twitter.

I contacted COO Spencer Rascoff and he tweeted back:

“Lenders shouldn’t rely on Zestimates. Use an appraisal.” “We have “a Zestimate is not an appraisal” language all over the site. http://twurl.nl/7lj6mc “

He then emailed me directly because he wanted to get to the bottom as to why they are so far off.

Director of Community Relations David Gibbons tweeted:

“…it may not change outcome by he {sic} can’t reduce heloc based on Zestimate alone.” “Lenders are supposed to use commercially licensed AVMs & appraisals, not Zestimates!”

While they are both correct, and I agree with them wholeheartedly, lenders ARE using their site, and if the site’s purpose is to provide real estate information, then the site should be more accurate.

Through emails and more discussion, I was able to find out more about how the Zestimate values are determined.

David direct messaged me that it: “looks like your purchase price and taxes have the biggest impact on your Zestimate…”

I asked what that had to do with a current value of a home, because there is no correlation whatsoever in the real estate market from what you paid for it and what it is worth now.

His answer: “homes only sell on average once every seven years so when figuring out what a home is worth its last price is important – though 2002 is…we count past sales in less and less over time … a sale last year would have much greater impact.”

NO WONDER the values are off so dramatically. And if Zestimates continue to be calculated in this respect, then we should be looking for values to be tremendously off in 2013-2014 in the other direction. So my client can be assured that in 3 years his Zestimate should be approximately $200,000 OVER true value!

Please be aware that the Zillow Zestimates, at least in the Towson market area, may have no relationship to the true value of any home.

This reiterates the point that REAL ESTATE IS LOCAL and, as COO Rascoff wrote: “a Zestimate is not a replacement for a real estate agent. Far from it.” For your free Towson Home Price Estimate, contact me today!

I pondered this recently, as a listing I have coming on the market in Hunt Valley has a Zestimate about $40,000 LESS than the value determined during my true, in-depth market analysis as a licensed Towson Real Estate Agent. (On the other hand, using their “My Estimator” tool brings the value up to over $110,000 HIGHER than its true value!) 

With a closer review of the Zillow site, I was able to find some interesting accuracy statistics about the Towson Home Price Zestimate averages (per Zillow.com):

• Zestimates within 5% of actual sales price (actual home sales) : 30%
• Zestimates within 10% of actual sales price (actual home sales) : 50%
• Zestimates within 20% of actual sales price (actual home sales): 71%
• Median Error: 10%

Here is the actual verbiage from them, which helps me understand the inaccuracy:

Data Coverage and Zestimate^® Accuracy

The home data we have compiled to generate a Zestimate home valuation varies by location. Some counties provide all the data we could hope for, but others are lacking such key things as the number of bedrooms and bathrooms, or, in some cases, the square footage of the home. The more data we have, the more accurate the Zestimate. And, we’ve made it easier for our users to help us improve accuracy by incorporating edited home facts into our Zestimate calculations. In some areas, we might not be able to produce a Zestimate at all, but we do have some basic information on the homes.

When I stopped to think about it, I realized that the site does not have correct information because Baltimore County has not provided it to the public about the square footage, number of baths, the fact that it has hardwood floors throughout, a finished basement, and other imperative details when determining a Hunt Valley House Value.

As an example, if there is a home in Towson with the correct value of $300,000, 71% of the time the Zestimate could price the home as low as $240,000. Can you imagine being a seller viewing that info? Or how about a buyer, if it were 20% ABOVE? Would you, as a buyer, be happy with paying $360,000 for this home?

Zillow.com even acknowledges the importance of getting a comprehensive market analysis from a qualified local real estate agent. To get your free Towson Home Price Estimate, call me!