A popular new website promises fast and accurate home valuations for free and with no obligation, but is an appraisal through the ether as accurate as one by an appraiser or your local real estate agent?
A new, Web-based real estate tool can tell you how much your home -- or your neighbor's -- is worth faster than you can look up an appraiser's phone number.
It's called Zillow.com, and it's the latest entrant into the online real estate world, already crowded with websites offering everything from discount mortgages to worldwide sales leads. This one promises free, up-to-date home-value information without the threat of a sales call from a mortgage broker or sales agent.
During the first eight hours of operation on Feb. 8, more than 300,000 people visited the site, causing it to crash for more than four hours.
"We've tapped a nerve," said Spencer Rascoff, CFO and vice president of marketing for Zillow.com. "Clearly, the American consumer appetite for real estate is insatiable."
By simply entering a street address and city name or ZIP code, Zillow will give you an estimate of a home's value, which it calls a "Zestimate." In many communities, you also can get the most recent sale price of a property, the approximate square footage, values of nearby houses and a satellite photo of the whole block. The site also can provide charts and graphs that show how a home's value has changed over time, as well as explanations of terms and how the data are analyzed.
The site is still in its beta phase, but it now contains information on more than 60 million U.S. homes, including many in the Twin Cities.
The site is managed by 75 people in Seattle who are constantly collecting information to be fed into complicated formulas producing Zestimates. Home values are based on several data sources, including tax records, sale history for individual houses and home-sale comparables. Eventually, Zillow hopes to provide data for 110 million homes.
Despite Zillow's reliance on multiple sources, some appraisers and sales agents say that there's no substitute for a good old fashioned in-person appraisal.
Steve Gergen, who has been in the appraisal business for 25 years and owns SFG Appraisal Co. in Mendota Heights, said that Zillow is a good starting point for people who want a rough idea of their home's value.
Zillow.com, co-founded by Richard Barton, creator of the Expedia.com travel website, says that it will not sell personal data. The site is backed with $32 million in venture-capital financing and is to be funded by advertising.
The company said this week that it has received real estate brokerage licenses in eight states, not including Minnesota. One reason is to gain access to multiple listing service data; in the Twin Cities area, the Regional Multiple Listing Service is owned by the four metro-area Realtor associations.
Mark Allen, CEO of the Minneapolis Area Association of Realtors, says that it's likely the company will pursue a license here, but he says that such a move won't threaten the livelihood of area Realtors.
"It's one thing to have information," Allen said. "But it's another to know how to use it."
Industry watchers speculate that Zillow could help revolutionize the way houses are bought and sold -- the way Expedia.com has transformed vacation planning -- as more and more people rely on the Internet to buy and sell houses.
In a recent survey by the National Association of Realtors, 74 percent of consumers said they start real estate searches online. Still, the website is a work in progress. For example, Zillow doesn't have complete information for homes in every state or metro area.
In the Twin Cities area, the site is most accurate in Hennepin and Ramsey counties. It uses a star system to indicate the accuracy of its Zestimates. The combined region of Minneapolis and St. Paul, for example, gets four out of four stars with a median error of 6.5 percent. The site claims that 68 percent of the time, its Zestimate is within 10 percent of a home's actual sale price.
Data for some cities can be considerably less reliable. For example, in response to an address in Anoka, Zillow offered a tax assessment and basic features of the home including number of bedrooms and square footage. Zillow wasn't able to calculate a Zestimate. Zillow representatives say they don't yet have complete information for such areas, but hope to get it soon.
There's another tool called "My Zestimator," which lets you factor in home improvements and correct misinformation on the site. (A Zestimate can also be wrong if public data are incorrect.)
"We're very open about the site being a work in progress," Rascoff said. "We admit that we're not perfect." The site has a question-and-answer section and a blog where users can to communicate with Zillow staffers.
George Karvel, professor of real estate at the University of St. Thomas, gives Zillow praise for its transparency. "I give them high marks for ethics," he said.
Karvel agrees with sales agents, appraisers and mortgage-loan officers who say that Zillow and other websites are valuable tools for buyers and sellers but that such sites aren't a substitute for the services of a professional.
"With better information, there is less tendency for buyers to overbuy and for sellers to underprice their homes," Karvel said. "It won't help you buy cheaply or sell more expensively, but it will take some of the risk away of paying for or selling for the wrong price. You could use it as a potential negotiating tool."
Dave Hicks, broker and owner of Century 21 Premier Group in Amery, Wis, isn't intimidated. "It's never going to take away the human part of the business," he said. "The more info you can get to form a basis the better, but don't rely solely on it or heavily on it."
Zillow executives say they aren't trying to steal business from sales agents. "A good Realtor who provides value to a consumer has absolutely nothing to worry about," Rascoff said. "Think of it this way: If you're sick, you may go to WebMD to educate yourself and you may take that information to the doctor, but you're still going to go to the doctor."