How accurate and relevant is ZILLOW’s data for Boulder, Colorado?
by Arn Rasker
ZILLOW, as a business model, is a lead generator for real estate agents, mortgage brokers, and banks.
Over the past ten years, ZILLOW has spent a lot of money placing itself in the top of Google search results. Zillow has also done a great job of creating a good user interface. A search through Google or Yahoo for “Real Estate in XYZ” will inevitably result in a list which includes ZILLOW somewhere near or at the top. Consequently, many potential real estate buyers are landing on the ZILLOW site, and combing through its data.
ZILLOW generates a lot of traffic to it’s site, and it sells positions in the site to agents. For comparative purposes, according to the Google Adwords Planning Tool, Google leads may cost a Real Estate Agent between $3 and $5 per click, and a mortgage company may pay up to $20 per lead.
According to a study released by Priceonomics on November 6, 2014, 74% of ZILLOW’s income comes from Real Estate Agent leads, 8% comes from bank leads, and 18% comes from advertising. ZILLOW’s model has been quite effective, for ZILLOW. But how effective is it at serving the home owners and home buyers?
But how valuable is the ZILLOW data for Boulder Colorado? And how accurate is it? Let’s start with a look at the accuracy of the ZILLOW “Zestimate” for the Boulder, Colorado area. Next, let’s take a look at the relevancy of the home data that ZILLOW brings onto your screen. Let’s also look at the value of the ZILLOW suggested and recommended agents for the homes that you have found.
The Accuracy of the ZILLOW “Zestimate(tm)”.
Zillow, to its credit, makes the accuracy of its Zestimate data available to the public directly on its own web site, for the different areas for which it publishes Zestimate data. Try it for yourself, for the City you live in. Start by going to the ZILLOW.com site, and go directly to the bottom menu on the landing page. From this menu, select “Zestimates”. Once in “Zestimates”, select the button which says “How Accurate is the Zestimate?”. You will see a few sample data points for the Zestimate that look like this:
Finding Zillow data for Boulder, Colorado:
In the upper left hand side of this data display, you will be able to click on “States and Counties”, to receive Zestimate data for the State and County of your choice. Since we are interested in the accuracy of the ZILLOW data for Boulder, Colorado, these are the results that we got:
Zillow data for Boulder Colorado
The ZILLOW Zestimate accuracy for Boulder, Colorado is very interesting, especially because ZILLOW considers Boulder (and the Denver Front-Range Areas, in general) to be one of the most accurate data areas in the country, and has assigned its highest “four star” rating.
Now, lets take a look at the above data chart for Boulder. Starting from the right, you will see that 90.7% of the time ZILLOW, by it’s own reporting, is accurate within 20%. This means that ZILLOW has a 9.3% probability to be outside of the 20% range. This has significant consequences to both buyers and sellers. How does one know, from ZILLOW’s data, where one should price a home? For example, for a one million dollar home, a range of $800K to $1.2 Million is the best that ZILLOW can do with an accuracy rate of 90.7%. A $400K spread makes it very difficult for a seller to set a sales price on their home. The potential buyers will be confused as well. Neither side is served by this level of accuracy. Sure, the data is free. But as the saying goes, “you sometimes get what you paid for”.
How relevant is the ZILLOW data for Boulder, Colorado?
Boulder has a very short supply of inventory, historically speaking. The asking price, under-contract, and sold data for Boulder in the chart below was compiled by RE/MAX Alliance of Boulder analyst Greg Smith. This data illustrates what has happened in Boulder over the past few months:
A couple of things worth noting in the current Boulder market. The sales prices, on the average, have been climbing at a fairly constant rate over the past two years. However, when you observe what has happened in February and March, you’ll see that the sales price rate jumped well over the average two year rate! The spread between the average asking and the average selling price also decreased significantly. As in all economic models, there are numerous variables at play. However, the Boulder market has been affected by a low supply of inventory, a future forecast predicting low construction rates in the median home values, along with a relatively high overall demand. In summary, this means that any data that is even a few months old can be obsolete data. How dynamically adjusted and accounted for do you think the data will be on ZILLOW?
Another factor to consider when evaluating relevancy of the ZILLOW data, is the fact that many homes in Boulder are hitting the market at higher prices than they might have sold for even four months ago, and selling within days of listing for prices sometimes well over the asking price. Many of the homes that are going under contract in 2015 are being negotiated amongst the professional broker community before they are picked-up by third party listing services such as ZILLOW. In a nutshell, this often translates to old data. And old data is not what you want to be working with in a fast moving market.
Who are the agents that appear on the ZILLOW web site, next to the property, and what will they do for you?
Good question! We do know one thing: They have spent some money to be placed on the screen next to that property you are so interested in. But does that make them qualified to represent you when it comes time to purchasing your next home? Do you think they know the property, or even where it is located?
My recommendation is to deal with an professional local agent who knows the local BOULDER market and its current inventory. Many of the agents that appear next to the properties in a “Boulder” search are not based in Boulder, and might be based in Denver or other “nearby” cities. Denver is only 35 miles from Boulder, but the two cities are worlds apart in many ways. If you’re buying a home in Boulder, you’ll want a well informed broker from Boulder, who knows the City and its market….and not someone who is trying to buy themselves into the market by paying ZILLOW a fee to put themselves next to a property they know nothing about.
Should a seller consider selling a home without the services and market knowledge of a professional broker, and instead list the home on ZILLOW as a for-sale-by-owner?
Another great question! And it is a question that I will love to expand a discussion around. However, this blog has probably already worn you out. So, I will take this question up on the next blog. In the meantime, I hope I have answered a few questions you might have had regarding ZILLOW and the accuracy of the ZILLOW “Zestimates”.
Date of Original Zillow post publication: 5/2015