Yavapai County Assessor Pam Pearsall has kept an eye on the growing popularity of real estate website Zillow.com in recent years. Having recently acquired Trulia.com it is hard to deny the impact Zillow will have on the national real estate market in coming years.
Zillow’s business model is to be a “real estate portal” whereby it seeks to attract would be home buyers and sellers to its website. Part of what it does is to predict “Zestimates,” which are estimations of a home’s current market value. “Zillow has even begun trying to forecast the future trend of a home’s value,” Pearsall said.
Because of the growing trend of owners referring to Zillow estimates of their property, Assessor Pearsall asked her staff to do a study of a random sample of single family homes in Yavapai County which Zillow had predicted values on. The goal of this study was to gain a level of understanding as to the accuracy of their estimates as they compare to her own mass appraisal process and values. Much of the property data Zillow uses for their predictions comes from County Assessor records.
In a recent survey conducted by Discover Home Loans of 1,003 homebuyers about how technology influenced their experience, 83% reported using listing sites like Zillow and Trulia to browse home listings. Zillow recently claimed to have hosted 86 million unique viewers of their website in the first quarter of 2014 alone. With this big of an impact it seems likely that some local Yavapai County home buyers and sellers will be using Zillow in their own research.
County Assessors find it challenging to estimate property values on an annual basis for taxation purposes. Zillow claims to predict a home’s value three times a week by using proprietary algorithms, statistical processes and geo coordinate data. The accuracy of these predictions has many skeptics questioning the accuracy and details of their data. The proponents, and Zillow itself, argue that their predictions are only meant to give a range of value to help a buyer or seller make more informed decisions. Zillow touts their estimations as only a starting point in the real estate decision process.
It is under these circumstances that Assessor Pearsall wanted to gain some perspective of Zillow’s relative accuracy compared with her updated annual 2016 tax year homes values which arrived in homeowner’s mailboxes around the end of February.The results were revealing for a variety of reasons. “We wanted to compare Zillow’s predictions of Single Family Homes against our 2016 noticed Full Cash Values (FCV), also known as market values,” the Assessor said.
The 2016 tax year values are measured against sales occuring over an 18 month period from Jan 2013 through June 2014. For the upcoming tax year Assessor Pearsall has been informed by the equalization staff of the Arizona Department of Revenue (DOR) that her offices valuation uniformity of residential properties is the best it has been in six years. “Part of this stablization in the current housing market is probably due to a more rational mindset of buyers and sellers in the aftermath of the housing market crash” the Assessor said.
County Assessors in Arizona carryout a mass appraisal process whereby the market value (FCV) they calculate is generally lower than the true market value of a property. This helps insure a cushion against a rapidly declining market. The Assessor study took this into account and adjusted the Zillow estimates to the 2016 tax year level of assessment. Summary of Assessor Pearsalls study:
County randomly selected Single Family Properties – 1,933
Zillow found and returned estimates on 1,763 properties
Zillow estimates had a median error rate of 6.8% from Assessor Values. Zillow claims a National median error rate of about 7%.
Zillow estimates were generally overvalued on lower quality homes and undervalued on higher quality homes relative to Assessor values.
The unadjusted Zillow estimates (June 2014) for market value were above Assessor values on 1,722 (97.7%) of the tested 1,763 homes
The Assessor’s Office did not test Condos, Mobile Homes or vacant properties
On September 14th she presented her findings, to a standing room only crowd of over 250 attendees, at the 81st Annual International Association of Assessing Officers in Indianapolis. The presentation was so well received that Assessor Pearsall has been asked to submit her findings to be published in the Fair and Equitable magazine of the IAAO.
On October 15th she will be presenting to the Arizona Tax Conference in Flagstaff. Pearsall also hopes to present her findings to local real estate professionals.
Assessor Pearsall expects to implement office training to insure her staff can respond to the public’s growing use of Zillow information. According to some experts Zillow is seen as positioning itself to bring the entire home buying process online. Pearsall stresses that this small study in no way represents a comprehensive review or endorsement of Zillow’s practice. Would be users are reminded that, in Zillow’s own words “…it is a starting point in determining a home's value and is not an official appraisal.”