If you speak to real estate professionals, they probably all have similar opinions about Zillow. In fact, we penned it a “Zill-pocalypse.” A little dramatic? Maybe, but there are professionals out there who truly believe that Zillow will destroy their real estate agency.
In reality, consumers flock to Zillow for its streamlined ability to browse listings and see everything from listing prices, previous sales, property taxes and more all in one place. Homeowners can also see their home’s Zestimate, or Zillow’s online appraisal of their home. How convenient is that? But issues arise when there’s a discrepancy between what a homeowner thinks their home is worth and what it is actually worth. On top of that, many brokers think tech like Zillow is stripping their role from them in the industry. Unfortunately, none of us are outrunning the tech machine — companies and tech like Zillow are here to stay.
Zillow is improving its home values to be more accurate
In June 2021, Zillow changed the way it appraises home values online to ensure accuracy. Previously, Zillow utilized an algorithm of 1,000 different variations from local markets, which was a great starting point for homeowners, but by no means was meant to be a formal appraisal. However, Zillow is tapping into artificial intelligence to improve its accuracy by nearly 12% including daily updates as opposed to monthly or even weekly ones.
Why would Zillow need to improve this technology? For one, homeowners can trust its value a little more. But while Zillow is entertaining and lets many people live out their dreams of residing in a luxury multi-thousands square foot home (we’re talking about your Zillow skit, SNL), the use of artificial intelligence also helps Zillow to buy more homes. Like other iBuyers, Zillow buys a house based on the fair market price, and by improving its appraisal accuracy, Zillow ensures that it’s paying the right amount, not wasting any money in the process.
A more convenient process
This technology doesn’t drive any formal appraisals yet, but it presents an opportunity to make a change to the industry. Overall, the pandemic has caused a wave of technological adoption as things like digital transaction management tools helped to move things online and keep people from having to meet face-to-face. On the same note, more accurate home valuations could also play a factor in this digital evolution as well. It would push the home buying process even further online, using technology to speed up the process of purchasing a home. Instead of fearing that technology would take over the appraisal process and jobs, more accurate online home values is an additional tool that can benefit home appraisers. In fact, the home appraisal process is one piece of the purchasing puzzle that remains unaided by tech.
A possible solution to racial discrimination
Racial discrimination is a well-known byproduct of the appraisal process reported in anecdotal and official reports. In actuality, it’s been documented on several different occasions:
- The Canadian Broadcasting Company investigated the process finding that appraisals completed for homes of Black actors came in, at the worst, several hundred thousand dollars below others.
- The Washington Post ran a story where a mixed race couple received an appraisal nearly $100k less than expected in Denver. A second appraisal was requested, in which only the white wife stayed home, and the numbers returned a $145k change.
These huge gaps in home appraisals expose a weakness in the appraisal process: a lack of consistency. More accurate online estimates have the potential to fight racial discrimination in the home buying and selling processes. For example, technology’s use of algorithms and AI completely removes the component of human bias from an appraisal. On top of that, homeowners who suspect racial discrimination has weaseled its way into their home’s appraisal have another tool to compare. Technology really has the ability to improve the appraisal process.
A tough situation for real estate agents
Real estate professionals already have trouble dealing with know-it-all clients. These so-called experts use companies like Zillow to convince themselves they are industry experts, making the agent’s job just that much harder. The current market is already making it challenging — it’s hard not to mention the unrealistic pricing and the insane number of offers some homes are receiving due to the demand for homes. Dealing with these expectations is difficult, yes, but more accurate online estimates will only bring out more appraisal armchair experts. That leaves us with the question: how will you manage tough clients who won’t budge on pricing?
- First of all, reiterate and repeat yourself that Zillow’s home appraisal tool is not a professional appraisal. It cannot be used as a formal assessment of the property, so it’s just a starting point for both you and your client.
- Do as much as possible to prepare your client for reality. Like we said earlier, if they have a selling price based on Zillow’s estimate and they’re expecting a high number of offers and a bidding war, the client’s expectations are probably too high. Speak to other agents in the neighborhood about their experience — how many offers did they receive? Was it above asking? How long was it on the market? These questions will help provide your client an appropriate expectation.
- Review comparable properties with your client before setting a listing price. You’re the expert, so operating on the same page as your client is essential to both of your success in this market. Plus, reviewing comparables early on allows both parties the chance to test the relationship. If you can’t come to an agreement, or settle on a client’s listing price that you know is far too high, it is only a waste of both of your time.
- Lastly, you need to find other ways to be valuable to your clients — customer service, support, help with paperwork, etc. Keep in mind that you can reinvent the value you bring to the table but tools like Zillow can’t.
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