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Previously, the Zestimate for Rascoff’s home was $1.75 million the day after it sold. Currently, the Zestimate reads $1.5 million (pictured above).

The Truth About Zestimates

Zillow CEO Sold his Home for Significantly Less than Zestimate

According to an article by inman.com, Zillow CEO Spencer Rascoff, sold his Seattle home for much less than his companies (Z)estimated price. On February 29th 2016, his home sold for $1.05 million, a significant 40 percent less than the $1.75 million Zestimate described on the property profile the following day. After that, the gap between the sales price and Zestimate has only decreased slightly. Zillow is upfront about the possible discrepancies between Zestimates. However, not all consumers recognize that Zestimates are intended to serve as a starting point, rather than a final determination of property value.

Zillow’s Chief Analytics Officer Stan Humphries stated that the subject properties placement on a heavily traveled street and irregularly shaped triangle lot played a part in the overestimation of the home’s value. He also acknowledged that discrepancies, of course, can go both ways as human errors are a possibility as well.

It is interesting to note that this property was first listed in July 2015 at $1.295 million, with a Zestimate of $1.388 million (7.3 percent higher). The property was taken off, and put back on the market multiple times before it sold in February 2016 for $1.050 million, with a Zestimate of $1.750 (40 percent higher).

On March 1st (day after sale), the Zestimate was $1.75 million. On May 5th, the home’s Zestimate dropped to $1.61 million. Its current Zestimate, almost two years after the date of sale, is $1.5 million. There is not an accurate correlation between the the Zestimates and the gap between sales price. Zillow claims that the Zestimate’s national median error rate is 7.9 percent which means that half of them are withim the 7.9 percent of a home’s sale price and the other half are off by over 7.9 percent of a home's sale price.

Zillow’s Senior Economist Skylar Olsen made an interesting assessment in that Rascoff’s home embodies “the classic luxury homes problem”. This means that Zestimates are unable to take non-quantifiable factors such as lighting, design, or layout into account; these factors tend to have much more of an impact on the values of luxury homes as opposed to other types of properties. Savvy real estate agents are capable of integrating these factors into an accurate list price, unlike the Zestimate algorithm which is not designed for that level of specificity.

Zillow states that understanding how Zestimates are calculated in addition to its strengths and weaknesses is important for agents and consumers in order to utilize it as a starting point. It is a great tool to get the discussion going but it should not be the be-all end-all when it comes to determining property values. 

Mark Your Calendars 

March 1st - FIGat7th Farmers Market - Fig@7th - 10:00am-2:00pm (every Thursday) 

March 3rd - Old Pasadena Historic District Walking Tour - Old Pasadena @ 9:00am-11:15am

March 3rd - Spring Bloom Walks - Descanso Gardens @ 11:00am and 1:00pm 

March 3rd - Grilling in the Garden - Pasadena Armstrong Garden Centers @ 11:00am-1:00pm

March 3rd - Greenbar Distillery Tours - Green Bar Distillery @ 1:00pm-7:00pm (every Saturday) 

March 4th - PCC Flea Market - PCC Campus West Side @ 8:00am - 3:00pm

March 7th-15th - Pasadena International Film Festival (PIFF) - Laemmle Playhouse 7 @ all day event 

March 7th - Altadena Farmers' Market - Loma Alta Park @ 3:00pm-7:00pm (every Wednesday)

March 10th - Taste of Art: Appetizing America - The Huntington Library, Art Collections, and Botanical Gardens @ 9:00am-12:30pm 

March 11th - RG Canning Flea Market - Rose Bowl Stadium @ 5:00am-4:30pm 

March 12th - Japanese Teahouse Tours - The Huntington Library, Art Collections, and Botanical Gardens @ 11:30am-3:30pm

March 15th - LA City Hall Farmers Market - City Hall South lawn - 11:00am-2:00pm 

March 17th - 2018 Sierra Madre Wisteria Festival - Downtown Sierra Madre @ 9:00am-5:00pm

March 17th - Flower Arranging: Irish Spring -  The Huntington Library, Art Collections, and Botanical Gardens @ 10:00am-12:00pm

March 17th - Children's Flower Arranging: St. Patricks Day Flowers - The Huntington Library, Art Collections, and Botanical Gardens @ 1:00pm-2:30pm

March 21st - Vroman's Bookstore Presents Chelsea Clinton Signing She Persisted Around the World: 13 Women Who Changed History - Vroman's Bookstore Pasadena - 6:00pm-7:30pm 

March 24th - Taste of La Salle 2018 - La Salle High School Dining Pavilion & Atrium @ 6:30pm-9:00pm

March 25th - Spring Home Tour: "Better Home and Gardens" - multiple Pasadena locations @ 9:00am-4:00pm

March 25th - 61st Annual Bonsai Show - The Huntington Library, Art Collections, and Botanical Gardens @ 10:00am-5:00pm

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Contract Corner 

Inclusions and Exclusions

Inclusions and exclusions essentially determine what exactly comes with the property for sale, and what does not. Real estate contracts have language that specifies relevant personal property that is included in or excluded from the sale. Some examples of these items may include stoves, washers & dryers, refrigerators, and even chandeliers. This section in the RPA, otherwise known as the Residential Purchase Agreement, is located on page 3 section 8. In the RLA, the Residential Listing Agreement, it is located on page 2 section 4. For both buyers and sellers, it is important that this portion of the contract is completed and transparent. When this area is left unaddressed, it can lead to confusion on both ends of the transaction and can potentially complicate the closing process. Although these items should be specified in the original contracts, there is always the possibility of negotiation in which items can be included or excluded which would then be reflected on a counter offer(s).

Navigating through the labyrinth of details and information of a transaction is exactly why you, savvy buyers and sellers, need an experienced team. The SARKISSIAN + PERERA GROUP is here to help guide you through this process and ensure that you achieve all of your real estate goals! 

Copyright© 2018 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of March 1, 2018. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.

SARKISSIAN + PERERA GROUP

Chairman's Circle DRE#01242603|#01715728
Armen@ArmenSark.com
626.695.2808 | 626.676.9111
www.spregroup.com

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