Zillow Home Prices Remain a Joke for Austin TX

by Steve Crossland, REALTOR in Austin TX on May 26, 2009 · 18 comments

I just received this news flash via email from Zillow:

Home values in Austin increased 8.7%
According to the latest Zillow Real Estate Market Reports, home values in Austin increased 8.7% in the first quarter of 2009, compared to the first quarter of 2008. Nationally, home values decreased 14.2% during this same period.

Uh, sorry Zillow, but that ain’t right. The algorithms or data is being used to produce that conclusion need to be re-examined. Let’s look at some stats for Austin and surrounding areas.

Q1 2008 vs. Q1 2009
City of Austin Sales
Zillow says: Sales prices are up 8.7%
Austin MLS says: Sales prices are down 0.65%

City of Cedar Park
Zillow says: Sales prices are up 2.5%
Austin MLS says: Sales prices are down 3.9%

City of Pflugerville
Zillow says: Sales prices are up 11.5%
Austin MLS says: Sales prices are down 3.76%

You can see where this is heading. Never has it been easier for so many real estate consumers to be so misinformed about the real estate market. Don’t believe news headlines quoting any of these internet sites about values.

Shame on Zillow and these other valuation websites for getting it so wrong. What’s even sadder is that I saw in a listing the other day a Realtor comment “priced $20K below Zillow value”. Huh?

Good god, what have we come to? It’s bad enough we’ve always had bozo Realtors stating such rediculous comments such as “priced below tax appraised value”, as if tcad value was trustworthy or meaningful. Now they’re using Zillow as some sort of authoritative pricing guide, apparently ignorant of the fact that the Zillow value is a meaningless number to anyone who knows anything about real estate values. If it happens to be close, it’s just coincidence.

Just to be fair to Zillow, Texas is a non-disclosure state, meaning our MLS sales are not reported to the taxing authorities. States that do report actual sales values of all homes are states in which the Zillow price theoretically should be more accurate, since they have better data to work with. But Zillow nevertheless should know the shortcomings of its Texas numbers and double check before sending out news release announcements that are so grossly incorrect that the CEO should be embarrassed.

{ 18 comments… read them below or add one }

1 marty May 26, 2009 at 4:12 pm

zillow is probably using the highly inflated county appraisals that recently came out to say our homes have gone up. hell, according to the county my property value has increased over 100K since last year (last years value was around 250K, btw). what a joke…obviously i’m protesting.

also, while texas may be a non-disclosure state, county appraisal districts are definitely getting the selling price information from somewhere. they knew my buying price down to the penny a few years back, as well as several others i know that protested their first year after owning their home since i bought mine.

2 Julia May 26, 2009 at 8:37 pm

The only thing accurate I’ve seen with zillow prices in Austin is when an actual home is listed for a specific price. (I do like that feature.) Other than that, I have seen some numbers that are amazingly off.

3 Steve Crossland May 26, 2009 at 9:25 pm

Marty,

TCAD mails all sellers a questionnaire after the sale. If the seller completes it and returns it, they know your exact sales price.

Julia, funny but Zillow lists our lease listings as “For Sale” and we often get calls from weirdos asking “is that house really for sale for only $1500?”

Steve

4 Marshall May 27, 2009 at 8:53 am

“TCAD mails all sellers a questionnaire after the sale. If the seller completes it and returns it, they know your exact sales price.”

I’ve also wondered about this. Even if the form is ignored, they can still approximate the selling price. The only source where I believe they obtain this information is from the Warranty Deed, which lists the mortgage interests and the amounts financed. Thus, the higher your loan to value ratio, the closer your appraised value will be to your purchase price.

5 Pat May 27, 2009 at 9:10 am

The CAD’s method is to overestimate your value in hopes that you will protest by disclosing your actual selling price. But only a fraction of owners ever protest their values, hence the skewed picture. That said, CAD values generally trail the market by 2-3 years anyway. FWIW, Counties with a lot of sales activity like Travis and Williamson tend to be closer than most.

6 Aaron May 27, 2009 at 12:07 pm

Steve,

You wrote, “TCAD mails all sellers a questionnaire after the sale. If the seller completes it and returns it, they know your exact sales price.”

What is the incentive for the seller to complete this form? Do they get any sort of financial incentive from the county? In this “information economy” we find ourselves, that information is worth money, and I find it surprising that people are divulging it so freely.

7 Steve Crossland May 27, 2009 at 2:44 pm

> What is the incentive for the seller to complete this form?

No incentive. Some may be confused and think that it’s official and required. It doesn’t plainly say that it is volountary.

For others, maybe the buyer was a real jerk and beat the seller down on repairs or price, so reporting of the sales price to tcad affords the seller a mechanism for revenge.

Those are just my best guesses.

Steve

8 anon May 27, 2009 at 8:33 pm

Steve, the austin board of realtors (and other boards) are selling sales prices to taxing districts. This was directly told to me by a wcad official when I protested and they pulled up my exact sales price. I threw away the request for the sales price I got from wcad about a month after I purchased the home. Steve, why don’t realtors push back against the ABOR in support of thier clients?
Anon

9 anon May 27, 2009 at 9:21 pm

Steve,
Forgot one other thing – TCAD/WCAD sends the questionnaire to the buyer, not the seller. It wouldn’t make any sense to try and ask the seller, since the county does not have a mailing address.

-Anon

10 marty May 27, 2009 at 10:32 pm

exactly, anon. i was told something similar (although i can’t remember if it was exactly what you said) by my rep at travis cad…several years ago! bottom line is they’re getting the sales price from SOMEWHERE, and i have a hard time believing everyone i’ve talked to that has bought a house and protested recently is victim to the seller filling out the form the cad sends out.

11 Samuel May 28, 2009 at 12:42 am

Anon you pose an interesting comment about Realtor boards selling information to a public entity. I’d be interested to hear from any experts (particularly lawyers) if that would then subject such information to a FOIA (freedom of information act) or open records request. Typically but not always once a governmental entity has data it may be subject to open records.

12 Ray May 28, 2009 at 6:45 am

Austin Biz Journal just reported from a industry source (First American CoreLogic’s Home Price Index) not connected with Zillow that Austin home prices are up significantly in both Feb and March (Latest quarter mentioned). Whilst I know Zillow pricing is nothing but a sorry joke – it is all over the map dead wrong – I also know that local prices are increasing and sales really picked up in April and May with the arrival of Spring as.in any other year. Also, it cannot simply be ignored that FSBO increasingly accounts for a significant percentage of sales. Simply giving no mention to sales from that sector is an omission that will skew reported reality especially when numerous unbiased detailed studies concur that FSBO more often than not results in higher closing price over using alternative methods.

13 Steve Crossland May 28, 2009 at 6:53 am

> Also, it cannot simply be ignored that FSBO increasingly accounts for a significant percentage of sales. Simply giving no mention to sales from that sector is an omission

Hy Ray,

Send me your source of data for FSBO sales and I’ll be happy to report it. I doubt FSBOs are any better than they’ve ever been, as a percentage of total sales, which would be about 5% of all sales once family-to-family and off-market sales are excluded.

I can’t think of a more difficult market in which to attempt a FSBO sale, but I’m happy to see the stats to which you refer.

Steve

14 jeff May 29, 2009 at 8:07 am

RE: “TCAD mails all sellers a questionnaire after the sale. If the seller completes it and returns it, they know your exact sales price.”

TCAD has the price I paid for my house 4 years ago even though I did not fill out their form. I have to assume that they got the info from the title company, lender, or one of the agents. I do wonder if someone was paid to supply the info.

BTW, Zillow’s market price on my house is almost identical to TCAD’s appraisal price.

15 Steve Crossland May 29, 2009 at 5:42 pm

> the austin board of realtors (and other boards) are selling sales prices to taxing districts

No, they can’t do that. I emailed ACTRIS (Austin MLS) asking if TCAD is a member, and here is their response:

“TCAD is not an ACTRIS member. They gather data from various sources. The MLS Terms and Conditions of Use generally provide that the MLS may be accessed by ACTRIS Participants, Subscribers, and authorized appraisers as a tool to assist sellers and buyers who have a bona fide interest in purchasing or selling a property. The appraisal district has a broader purpose, and does not fit the requirement.”

> TCAD/WCAD sends the questionnaire to the buyer, not the seller.
I’ve always received one after selling a property and I’m pretty sure they mail to all buyers and sellers asking the price.

Steve

16 anon May 29, 2009 at 11:08 pm

Hey Steve-
So I had my informal protest at WCAD today and they changed their tune about sales info. The appraiser said they get their data in various ways and yes most of it was mls data but he would not tell me how they got it, nor would he direct me to someone that could tell me more. The protest didn’t go good at all, and the appraiser refused to use the list of comps I brought in (from a realtor).

The other interest item the appraiser brought up when I asked if I can have the list of all properties sold near my home in preparation for a formal protest was a no. Then he went on to bring up a new law (HB 2188, http://www.legis.state.tx.us/tlodocs/80R/billtext/html/HB02188F.HTM) saying that they only had to provide the list of properties they would use in the actual hearing. The text of the bill does not say that I cannot ask for the longer list of properties than the 5 WCAD uses: “he property owner or agent may, on request, obtain from the chief appraiser comparable sales data from a reasonable number of sales that is relevant to any matter to be determined by the appraisal review board at the hearing on the property owner’s protest.” Reasonable is pretty vague, but if there are say a list of 25 properties in their Excel sheet and they cherry pick 5, I think the entire list of 25 is pretty reasonable.

I stumbled across a very interesting HAR article about HB 2188 (http://houstonrealtor.har.com/DispArticle.cfm?ARTICLE_ID=19669), which pretty much confirms that counties (at least Harris) were getting an MLS feed and the HAR didn’t like some lawyers performing open records requests to get sales data. Performing open records request would be the way to make Zillow work given that Texas is a non-disclosure state, but the counties need sales information to function as directed by the state.

Anyways, HB 2188 basically tries to remake Texas a non-disclosure state even though sales information is collected and used by the counties.

17 David G from Zillow.com June 3, 2009 at 9:27 pm

Hi,

Good discussion. We do get some disclosed sales transactions in Austin but yes, non-disclosure makes Zestimate accuracy in Texas a challenge. Due to this challenge we also use some financing information, not published on the site, to attempt to infer sales values in non-disclosure states. It’s not perfect.

That said, there are also good reasons why Zillow’s Home Value Index will often depart from median sales values. Especially when the summer selling season kicks in or when a market is turning. The Home Value Index aggregates the estimated value of all homes in the area while median sales analysis only reports on the values of those homes that have recently sold. This distinction between home value indices and median sales analysis is discussed in more detail on the Zillow Blog: http://www.zillow.com/blog/debunking-the-median-sale-price/2008/03/27/

18 Barcelona Apartments July 23, 2009 at 1:10 am

hi David i read your article, I am not satisfied with your article regarding financial information, which you mentioned .Please update it and make it published.

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