Zillow.com is a fascinating what if type of tool. It allows you to zoom into neighborhoods to see estimated prices. On the surface, that would be a very attractive tool for real estate investors trolling neighborhoods. But once you peek under the hood, you may get a whole different story.
Zillow - like most tools of this sort - relies on publicly accessible data. In some localities, the data is quite thorough. In others, it is quite poor or nonexistient. For instance, the house I lived in while in Florida has accurate information for the size of the house and number of bedrooms and bathrooms. In the house I currently live in - in South Carolina - the square footage is way off and the bedroom and bathroom data is nonexistient.
So where I currently live, Zillow is quite useless. While it does show actual sales and their sale prices, the data on those houses and the other houses in the neighborhood is so incomplete, it is not worth the time to use it as a research tool. However, from where I lived in Florida, it has pretty decent house data on houses where I lived for several years. So as a real estate investor in that area, it would be quite useful for doing quick comparisons of recently sold houses to houses I was considering buying.
The other challenge zillow offers - even in cities where the data is good - is that it knows nothing about the condition and upgrades of a home. A real life appraiser evaluates many things when calculating an appraised value - and will often throw out anomalies. (Anomalies include things like houses that were in a foreclosure or houses in a stick built community when evaluating a brick home community.) Zillow calculates automatically based on the data it has and while I don’t know for certain, I’d bet that they do not have the ability to filter like an appraiser can.
So, is zillow a good tool for you? As the above has shown, it really will depend on where you live. The best way to "test" zillow is to check out known properties. Get a list of properties from the MLS. They will probably be offered at around their appraised value. And you will have details on bedrooms, bathrooms and square foot estimates. Take that data and compare it to what zillow is showing you and you will have a good feel for what zillow can and can’t do for you in just a few short minutes. If the data looks good, add it to your suite of research tools. If the data is not so good, just bookmark it and check back in six months to see if it has improved.
As a final note, just remember that zillow is only as good as the data they can get for their database. Where I live here in South Carolina, the only good source of comps, accurate details of recent sales, etc. is through the MLS and unless you are a professional who is allowed access to that data, you can’t get it through zillow or any of the paid comp services that exist out there.
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