Problems with Zillow -- Confirmed

Those of us who work day in and day out with the prices of homes and condos in the areas we specialize have for several years known about the problems with Zillow.

I've even heard some argue that the advent of Zillow has exacerabated the housing market problems here in Los Angeles. While I wouldn't go that far, I would say that Zillow has created real problems for agents trying to help their clients sell homes for the best price.

And there's a new study out on Zillow that confirms these problems.

The highly respected blog, Matrix, by NYC appraisal firm Miller Samuel highlights the study in a recent post HERE. The study is from Appraisal Journal and it shows that Zillow has flaws in the way it analyzes housing prices that serve to OVERESTIMATE housing prices, specifically, according to Appraisal Journal:

• "When it comes to using the Zillow.com automated valuation model (AVM) to get a free listing price on a house, users may be getting what they paid for, according to a report published by the Appraisal Institute that finds the Web site overestimates the values on homes almost as often as the actual homeowners."

This is actually more problematic than it sounds -- particularly in a real estate market that has suffered serious declines.

Most homeowners these days are dismayed at the loss of value in their properties (and rightly so). They still want to get the most for their home (and rightly so).

But when homeowners have an inflated perception of the value of their home from the outset (and that perception is reinforced by an inflated Zillow "Zestimate"), it only works against them.

We know from evidence over and over again that over-pricing your home from the outset by and large results in selling for less than pricing closer to the market at the beginning.

And inflated Zillow Zestimates just exacerbate this problem.