Zestimate equals activity, not value

[Michael M.]

The residential real estate market is priced according to recent sales (3-6 months) within the immediate vicinity (.25 mile) rather than the true "value" of your home which is perceived as subjective to the bean counters at the bank and Zillow.

Zillow has been appropriately bashed for the electronic appraisals they call "Zestimate". Both banks and Zillow rely on recent sales activity (3-6 months) to price a property which is not a proper appraisal to say the least. The current system favors recent sales within the immediate area and if non exist distortion occurs. 

Further compounding the Zestimate are bank lending practices of 75% loan to value (LTV). What if you've lived in your home for 20 years, made numerous repairs, getting everything just right while your neighbor just let his/her house become neglected for the last 20 years? It doesn't matter, you both lose. Unless recent sales of a matching property exist, both properties must use comps outside your immediate area. Therefore the Zestimate is more an indicator of sales activity rather than " value". Without recent sales banks rely on distorted pricing criteria to value a home. This affects offers and asking price.

This article was written due to 27 years experience watching the value of my former primary residence not being peoperly valued by the Zillow Zestimate. Within one year of thr property changing title, the Zestimate jumped $100k, no kidding. I have screenshots of the Zestimate before during and after the sale. The Zestimate is flawed, how banks value property is flawed. The true value of a home should be determined by a proper human appraiser, not a banking, one size fits all approach. The subject property was in Los Angeles County, CA

Perhaps when 3D printed housing becomes as easy as ordering a pizza, the Zestimate will finally become reliable.