A decade ago, when the real-estate bubble was reaching its peak and homeowners were giddy about the rise in home values, plugging in addresses at the new website Zillow became a national pastime.
“People ‘Zillowed’ their Christmas list. They would go and look up the home value of their boss and ex-girlfriend and ex-wife and their neighbors,” said Spencer Rascoff, Zillow’s CEO. The site was originally built around these automated valuations (or “Zestimates”)—in 2006, not a single for-sale listing was posted on the site. It now has millions of listings and agent reviews, among other features.
Knowing the estimated value of a home was power—or at the very least, juicy gossip. That’s why it was so surprising that Rascoff sold a Seattle investment property earlier this year for $1.1 million—far less than it’s Zestimate of $1.7 million. This particular house, he said, was located on a major arterial street, a fact that wasn’t baked into the Zestimate. The company has worked that data into its algorithm since then, he said.
According to the Real Deal, a Los Angeles real-estate news website, he also recently paid more than the Zestimate for a Los Angeles mansion. But Rascoff said it doesn’t really matter.
“It wasn’t top of mind. When we were trying to figure out the price for the house that we bought, we relied on the expertise of the real-estate agent to help us decide what to pay. The Zestimate, at that point, was less important,” he said.
The founders of the site always viewed the Zestimate as a starting point, a figure that would give a general sense of a home’s worth, Rascoff said. Zillow was never meant to replace real-estate agents (as travel sites such as Hotwire, which he co-founded, essentially did for travel agents), but to give consumers access to home-value information that real-estate agents were once gatekeepers of, he added. It’s also worth noting that real-estate agents now pay for advertising on the site, so the professionals have become an integral part of Zillow’s business model.
“We call it a Zestimate and not a zeppraisal and not a zeprice. It’s meant to be a starting point,” Rascoff said. “To determine a more accurate opinion of a home’s value you should hire a real-estate agent, or more to the point, you should sell the house and then you will know how much it’s worth.”
After the bubble burst and home prices plummeted, Zillowing all the homes on your Christmas list, let alone your own home, likely was a depressing exercise. Those who got carried away counting the Monopoly money building up in their home suddenly realized that values didn’t always go up. And perhaps people realized the importance of a real-estate professional when the market wasn’t on an upward trajectory. In today’s seller’s market, agents also are relevant, Rascoff said. In fact, his best piece of real-estate advice is to find a good agent, he said.
“Whether it is finding off-market inventory or helping figure out the home’s value and what bidding strategy to take, real-estate agents play a really important role,” he said. “There are 5% fewer homes available for sale today than there were a year ago, and we’re supply constrained and there’s plenty of demand because of low mortgage rates, and therefore home values are rising.” Over recent months, there has been somewhat of a softening in the housing market because builders have been building more homes, he said. Still, many markets are low on for-sale inventory, making it important for buyers and sellers to have a helping hand, he said.
Another misstep people make: not spending enough time mortgage shopping, he said. A recent Zillow survey, found people typically spend more time shopping for a car than a mortgage, and that’s a mistake, Rascoff said. The mortgage rate you are able to snag will have a great influence on monthly payments.
He also cautions people not to think of homes in black-and-white terms, that they’re either for sale or not. “Increasingly, homeowners view their home in a more fluid state,” he said. For instance, the home he recently sold in Seattle used to be a rental he lived in; he approached his landlord about buying it. After buying it, he ended up renting the home out before recently selling.
Even off-market properties might be available—at the right price, he said. And he encourages people to knock on doors and write letters to the owners of homes in which they’re interested.
After all, while you can likely thank sites like Zillow for real-estate voyeurism as we know it, the sites have also contributed to more people paying regular attention to their home’s value. An estimated two-thirds of people using Zillow are actively interested in buying or selling, while one-third of people are using the site to keep track of the market and their home’s value, Rascoff said.
“More people are more attuned to real estate than they used to be, whether they are in the market or not in the market,” said Rascoff. “Nowadays, the internet and the smartphone have blurred the lines.”