Fischer: In real estate, algorithms can’t compete with humans

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Jen FischerA full 18 years later, and it’s still happening. These guys have some true staying power. I’m referring to the wildly inaccurate real estate marketing platform that gives random “Zestimate’s” of what your home is worth using only algorithms. Who would have guessed that it would have lasted this long.
Several years ago, while I was still living at home with my gaggle of siblings, we all got together one day and decided to make a sort of file system for our mom’s lectures. We began by numbering them. The “I said you couldn’t leave until your room was clean,” lecture, for instance, was labeled Lecture #132. The “You were supposed to be home before midnight,” was Lecture #479, and so forth. These were common lectures that we all received on numerous occasions; thus, we found it helpful, and even commodious, to label them.
“Mom gave me Lecture #12 tonight,” one unfortunate sibling would report.
“You’re lucky it wasn’t #75.4,” another would respond. “It’s 45 minutes longer.”
Welcome to Jen’s Lecture Series #42, also known as the “Don’t use Zillow to estimate your home value,” for reference. This is a lecture I have given on multiple occasions; however, I find that not everyone has listened. Thus, like my mom, and at the risk of sounding repetitive, I am compelled to repeat it with some augmentation.
There is certainly no love lost between Zillow and Realtors. Why? Because we must deal with the fallout of the inaccurate misinformation that Zillow presents to the public about the valuation of their home. As we spend hours researching and analyzing homes to come up with a realistic value, we are often corrected by a misguided public because our values do not match the Zestimate.
Has Zillow, or any individual representing said company, gone into your home and evaluated the condition? What about the area? Does Zillow know that home values within the same zip code, even if the layout and condition is similar, can vary widely based on just a few blocks in location? Has Zillow roamed the neighborhood and become familiar with the amenities offered? What about the school ratings, shopping, restaurants or access to transportation? Are there structural issues? Has there been a history of soil or foundation issues in the area that could affect home value? Zillow doesn’t know any of this because Zillow, the entity, not a person, uses algorithms to estimate value. This doesn’t work.
Even Zillow acknowledges the limitations of such valuation systems. In fact, its own system gave it a proverbial tail whipping just a few years ago. At one point, it got into the business of buying houses. It would offer a quick cash purchase to an interested home seller based on its own Zestimates. This was short-lived. It learned the hard way that its own algorithm was recklessly inaccurate. It quickly pulled the plug, laid off a quarter of its work force and watched its own value drop by billions.
Yet, the heart of Zillow continues to pump, and it is primarily our fault. Zillow makes money by selling advertising spots to real estate agents, mortgage lenders and other related businesses. We throw exorbitant wads of hard-earned cash at it every month so that our names and phone numbers can be displayed prominently next to listings. We do this because this is still one of the primary sites that people use when looking for a home. We feed it, so it is no wonder it grows.
Either way, it is paramount to keep in mind that what Zillow says your home is worth could be up to 20% north or south of the actual value. That is significant. Computers, AI (artificial intelligence) and random algorithms can never replace a good old-fashioned human being.
Jen Fischer is an associate broker and Realtor. She can be reached at 801-645-2134 or jen@jen-fischer.com.