While online tools can be a great way for consumers to gain information on products before they buy, they can be a hassle for sellers. Brick-and-mortar retailers have long complained about shoppers coming in to look over their merchandise before buying it for a lower price online. There have also been multiple scandals involving books and other goods that go on sale at one retailer, and because of Amazon’s automatic price check, they go on sale for that same price on Amazon. This can then cause a domino effect of other retailers selling the product for the lower price, which some people claim devalues the items being sold.
But what about houses?
Selling a house is problematic enough on its own, but now homeowners looking to sell have to deal with buyers who use Zillow’s online tool, Zestimate, to get an estimate of the price of their house. Zestimate takes the information on a house and uses a proprietary algorithm to calculate an estimated home price. Of course, Zestimate only has access to information on the house that’s publicly available, whereas an appraiser would have access to much more information on a property, making their appraisal different from Zillow’s online estimate.
Nevertheless, buyers come in expecting to pay the amount they saw on Zillow, even though the site warns consumers that the number is only an estimate and homes might very well sell for more or less than the amount provided by their online tool. It is not an appraisal and most of its estimates have a 4.6% error rate, meaning the price it gives could be 4.6% more or less than the actual price of the property. Zillow says the estimate is meant as a starting point, not a final number. Continue reading