For as long as it has existed, Zillow’s “Zestimate” has been something of a joke to real estate agents. Since the firm launched the Zestimate in 2006, the first conversation between potential sellers and listing agents often deals with the misconception that the Zestimate is anything more than a computer program’s Hail Mary that lands in the wide outer circles of a target.
However, the Realtor, armed with proprietary MLS information, is better suited to price your home.
That is until Zillow makes a cash offer for their “Zestimate” of the seller’s home, which is exactly what the real estate portal-turned-discount broker has started doing in 23 American cities, including Dallas, Houston, and San Antonio.
According to Zillow, the Zestimate is now an initial cash offer as part of the brand’s “Zillow Offers” platform. After a decade and a half, has the Zestimate gone legit?
“For 15 years, homeowners and home shoppers have come to rely on the Zestimate as an essential first step. This exciting advancement demonstrates the confidence we have in the Zestimate and the lengths we are willing to go to make selling your home truly seamless and easy,” said Zillow Chief Operating Officer Jeremy Wacksman.
Leaning on Artificial Intelligence
“This is a proud moment for Zillow’s tech team and speaks to the advancements they’ve made in machine learning and AI technology,” Wacksman said. “Zillow is transforming the way people sell and buy homes. Presenting the Zestimate as a cash offer to qualifying homes up front will save time, reduce friction and provide greater transparency – getting us closer to our vision of helping customers transact with the click of a button.”
That the Zestimate is now a sales tool for Zillow speaks to their entire business model, points out David Maez, broker at Plano’s Vivo Realty Group.
“Real Estate sales has always been about lead generation. Zillow is following the money,” Maez said. “Seller leads are highly desirable, and if Zillow can offer sellers instant offers and generate listing leads in the process, why not?”
Since the Zestimate was introduced, the real estate business has transformed at warp speed, taking agents out of offices and putting them into the field. Offers are submitted online almost exclusively now, and every home search these days starts on the Internet. The brand itself has become a household name, even being lampooned on Saturday Night Live. The brand is now fully vertically integrated, with Zillow Offers customers using Zillow-affiliated mortgage, title, and escrow services through Zillow Home Loans and Zillow Closing Services.
“Technology will — scratch that — has changed the way people buy and sell, and it will continue to change. And why not?” Maez asked. “For some people Zillow Offers might work, but for most it will not. Why? Good agents are experts in their field and maximize the value of a home by marketing and suggesting updates, pricing it correctly, minimizing fallout in a transaction, negotiating repairs, and get deals to the closing table.”
Zillow Offer, or Best Offer?
And while a cash offer might sound enticing, is it really the best offer?
“I have cash buyers who are willing and able to purchase many of my upcoming listings however, my advice to my sellers is that in this climate, market exposure is the most beneficial avenue for them,” says Kaitlin Lovern of Century 21 Judge Fite Realtors. “It would be a disservice to them to execute a contract without letting the market work in their favor. I am seeing buyers explore all avenues to make aggressive offers that entice a seller.”
And what about the accuracy of the Zestimate, which Zillow claims has a 1.9 percent median error rate nationwide?
“There is no scientific method behind pricing a home, and a Zestimate can’t accurately encompass the true value of a home,” Lovern said. “Partnering with a Realtor offers you exposure, marketing, expertise, protection, and data that helps the consumer obtain the best possible offer that is out there.”
Maez agreed, though he acknowledged that Zillow Offers on Zestimates may have a place in the market.
“Is Zillow Offers giving your sellers the best offer for their property? No. And that might be okay for some sellers who want a quick out,” Maez said. “I think as agents we need to not worry so much about tech entering the space, but more about how to adapt and respond, provide value and prove your worth.”
More Than Just a Transaction
Many Realtors already know they are unlikely to be replaced by Zillow, and the main reason is that buying and selling homes is so much more than paperwork and deposits.
“While we continue to see these Internet programs come out, Beth [Douglas] and I find that our clients still desire and appreciate more guidance, interaction and personal service,” said Cathy Browne of Compass’ Browne Douglas Group. “Anyone considering these programs should make sure to read the fine print, especially concerning fees and taxes.”
That’s an interesting point for homeowners who think the cash from a sale according to the Zestimate would mean a windfall. You can look up your address on Zillow and see if your home qualifies for a Zillow Offer. The site has a mortgage payoff tool that would tell you what your estimated net proceeds would be if you sold. Most Realtors would tell you that in certain areas of North Texas, the Zestimate could be off by anywhere from $10,000 to $50,000 or more.
“Until AI, Zillow, or any other platform can do what agents do, it’s safe to say our profession isn’t going anywhere anytime soon,” Maez said. “Is it changing? Yes. But like that cab driver that said UBER would never make it, or like Blockbuster ignoring Netflix, we can’t ignore the fact that people will always seek to save time and make things easier. Take Best Buy for example, here’s a company that could easily be taken out by Amazon, but why is it thriving? They adapted, they worked harder, they price-matched, they listened to the consumer and provided value. Agents will need to do the same.”
“The way I see this is a lot how I see TurboTax,” Lovern added. “Yes, TurboTax can save you the cost of a CPA, but is it really saving you money in the long run? How much savings are you missing out on by not hiring a professional whose daily focus is the work at hand? How much tax savings did you lose out on because you thought you were saving the cost of a professional?”
