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Real Estate Guide 2007
Take action: do's & dont's
With the real estate market in transition the game has changed. We examine ways to adjust.
Take action: do's and don'ts
Real estate value Web sites good but not perfect
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"Try a few of the sites and you'll see you're getting answers that look like the result of a pinball machine," says Frank Gallinelli, president and owner of RealData, which produces software for real estate investors and developers. "If you just want to make yourself feel better or make someone else spend some money, you can prove virtually anything with these sites."

FTC complaint
The frequent inaccuracy of the estimated values was one of the major points of a complaint filed in fall 2006 with the Federal Trade Commission against Zillow by the National Community Reinvestment Coalition, or NCRC. The coalition, made up of more than 600 community-based organizations promoting responsible lending and equal access to credit, claimed the site intentionally misled the public and real estate professionals about the accuracy of its valuations, called "zestimates." 

In an audit of the site, NCRC found that the "zestimates" on the properties it reviewed came within 10 percent of the actual appraised value of the properties less than 30 percent of the time. It also charged that the site tended to overvalue properties in predominantly white neighborhoods and undervalue them in predominantly Hispanic or black neighborhoods.

Zillow spokeswoman Amy Bohutinsky says Zillow's "zestimates" are designed as a starting point and that the site says in many places that it's not an appraisal, but a free research tool for consumers, and that it tries to be "really transparent" about its accuracy. Zillow claims that its median margin of error is 7.2 percent nationwide, and that 62 percent of "zestimates" fall within 10 percent of the actual sale price of a home, Bohutinsky says. But even Zillow's figures mean 38 percent don't.

Bohutinsky says that once Zillow learned about the NCRC complaint, it immediately contacted the group and began a "series of positive and productive conversations to help them better understand our business. We feel good that this matter can be resolved in the near future."

David Berenbaum, executive vice president of NCRC, confirmed that he had been contacted by Zillow's attorney and they were working on a resolution.   

"We want to make sure consumers understand the strength and quality of the information they're looking at, and we want to be sure the company's 'zestimates' are accurate in low-to-moderate neighborhoods and more affluent areas," Berenbaum says. "We hope we can create a model that others will emulate."

Good raw data
If the sites have a practical use, it's in the amount of raw information they give you, Gallinelli says. The primary benefit is that you can see the actual selling price and date that houses in the neighborhood sold, if the house is in a county where the sales records are updated online on a regular basis.

Otherwise, ratchet down your expectations, Gallinelli says. "If you think this is the magic silver bullet, it's not. There are too many ways the estimate of value could go astray. If you put on blinders and think it will spit out the real market value, you're in trouble."

The bottom line is that online real estate valuation sites are great as a starting point for research, but they have limitations and they're not looking out for your best interests.

"Just because it's posted on a Web site doesn't mean it's accurate," Berenbaum says. "There is no substitute for doing your due diligence."

Pat Curry is a freelance writer based in Georgia.

-- Posted: March 8, 2007
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