Why Zillow Sucks

Why Zillow Sucks? Hello and welcome to Todd Miller TV and once again in front of the light board hot news is Zillow is doing an IPO of course Zillow if you are aware of what is going on in the industry Zillow came in a number of years ago and a lot of people hailed them as hey they are going to do away with real estate agents because once everyone knows what their houses is worth, we don’t need an agent because apparently that is the only value that the agent provides.And what I want to do is talk about specifically why that didn’t happen so everyone said that real estate agents would go away and actually the ops that has happened Zillow needs agents more than anybody needs them because that is how they make their money but I want to go into the specifics of why their business model doesn’t work or not the business model but why their process doesn’t work, why their home values were totally inaccurate.So first example, this is a real world example, it happened to me in my neighborhood where the Zillow estimated houses, they were way off the market and I will show you how the couple ways that can happen so Zillow uses historical data, current data and then treadlines and it just takes mathematical formula and does that. And that is going to probably get you within about 20% of the value it is going to get you pretty close but that is not close enough for realistically what you need you know 20% is not you know not anywhere near.Most people can have a better idea I think what their homes worth than Zillow. So I will give you a quick example so we will just take two houses, okay, you got house and a house over here, okay and then we will just say there identical houses like the house that was next door to mine was identical and we will say that in January this house gets purchased for will just say $300,000, okay. Now the market is taking off and the market is really climbing and then 6 months later so we will just call it July this house gets sold for 350.So 50,000 more right, so what Zillow does, Zillow goes well this house must be worth more than this one. So let’s say later on a few years later this house sells and this house that was originally 300 ends up selling for 400,000, okay. Zillow is automatically going to go, Oh this house must be worth 450 and the reason it must be worth 450 is because this one is sold for 300, this one is sold for 350, this one therefore is worth $50,000 more and then this one just sold for 400 so we will just make this, call this one 450.Well here is the interesting thing, okay. Let’s say that this house it was worth 300,000 and this one they were identical when this happened and let’s say this was a few years in between. Well what happened to this house was that after it was purchased the people had a swimming pool, put in, okay adding value and that these people didn’t. They just whatever the house was they left it that way. Then the market kind of got to its peak and actually started declining, okay.So these, the owner of this house was fortunate they were able to sell it you know this at peak may have been worth 500,000 thousand but they were able to get 400 because of timing when they sold it. So what is happening here is you have got a house A that never was worth 50,000 more than this house. It was never, it was generally worth the same and the proof that was made which Zillow doesn’t know about that was made in after the purchase and they bought and the pull was put in.So actually not only is it not even worth this, it is worth less than this so you have got a person here and it let’s assume it is the same day it discloses. The same day discloses, this house is worth less because it doesn’t have a pull. It is probably worth 380, 370, it is going to be worth something less but Zillow thinks worth 450. Now in a declining market its values are changing that is even worse because 6 months later it is still going to think it is worth 450 until it finds another sale and it makes another guess.So that is one of the big reasons Zillow doesn’t work. The number one thing I got my goal list to clients is they, “Oh well on Zillow it says it is worth this from my house just so it is for money. I can’t believe you real estate agents are just trying to— you just want me to sell it really cheap so you can get paid.” I know that is— you know this is the day that this is what is showing and you know unfortunately Zillow has cost a lot of eggs amongst people.I think what they should do on Zillow is on the top of the web page put for entertainment purposes only because it is you know when you are taking something as critical as somebody’s home putting a value on it sort of like with the stamp of approval I guess that people feel Zillow has, it just— it is crazy you know especially when I give an example like this so that is why I don’t believe Zillow is very good at guessing home prices.I think what Zillow is really good in doing is getting people to look at the site and then over here going use these real estate agents, use these agents to buy a house, because they make a ton of money selling these adds and selling leads. They are trying to capture information and sell it so some of you who are purist out there, who thought that Zillow would be the answer it would totally change your real estate interest industry, it is just a piece of the real estate industry.So that is my update for today, I hope this was informative for you and I like to see you on the next video update, thanks a lot.