From the moment Zillow released its first Zestimate, listing agents have bemoaned the fact that these automated property price “estimates” pose a major challenge in correctly pricing properties. Is it possible, however, that Zillow’s new research could be your best friend on your next listing appointment?
At Real Estate Connect, News Corp. Executive Chairman Rupert Murdoch asked, “What does Zillow mean, anyway?”
Zillow CEO Spencer Rascoff and Chief Economist Stan Humphries answer that question in their new book, “Zillow Talk: The New Rules of Real Estate.” “The term ‘Zillow’ actually is a “hybrid of ‘zillions’ and ‘pillows’ … the zillions of data points and calculations we crunch to better understand the housing market. Pillows, where we lay our heads at the end of the day, are an iconic representation of the emotional importance that home has in our lives.”
The big story in “Zillow Talk” is that it is the first book to use big data to address issues that practitioners regularly face in their business. The book’s conclusions are based upon Zillow’s “zillions of data points” and explore many commonly held real estate myths. Moreover, they can be powerful tools to help you be the winning listing agent on your next listing appointment.
Overcoming the Zestimate objection
First, always remember that Zestimates are automated estimates. The values are accurate plus or minus 7 percent, 95 percent of the time. In other words, if your Zestimate says that a property is worth $200,000, there is a 95 percent chance that the subject property will sell between $186,000 and $214,000. There is a 5 percent chance that the home will sell outside those parameters.
When you know that the Zestimate is off, overcome the objection by pointing to other competing automated valuation models (AVMs). Options include the Chase Home Evaluator, ePropertyWatch.com (this uses the CoreLogic AVM to generate values), Homesnap, Moveup.com, as well as your personal comparative market analysis (CMA). Provide the sellers with these alternative sources and ask, “Which of these is correct?”
When the Zestimate does agree with your valuation, use the Zestimate to support your case. For example, assume the buyer brings your sellers an offer based upon the county tax assessor’s valuation. If your CMA agrees with the property’s Zestimate, providing these two resources together can be a powerful way to persuade unrealistic buyers to offer a more realistic price.
Build a better housetrap
Your goal as an agent is to help your sellers achieve the highest possible price in the shortest amount of time. To achieve this goal, the authors recommend that you build a better “housetrap.” This begins with the words that you select to market the property: “The picture you are painting with certain words can be worth thousands of dollars.”
Using words such as “investment,” “potential,” “fixer” or “TLC” can cost your sellers up to 7 percent of their asking price, according to Zillow data, and words such as “luxurious,” “captivating” or “fantastic” (as in fantastic views) can help the seller net up to 8.2 percent more. The secret here is that the words alone aren’t enough — the property description must actually match the property’s features.
Moreover, when you write your property ad, be as objective as possible. Specifically, words such as “granite” and “stainless” can net the seller between 1.1-4.16 percent more, the Zillow data found. The lower the price range, the greater the effect. More words are better, up to 250, but choosing the right words is the key. Stress the home’s quality features, and look for what differentiates the property from other competing listings.
Gear up to hit the sweet spot
The month in which a seller lists their home affects their bottom line. Although sales typically peak in June, Zillow’s traffic data shows “a sharp spike in visitors making contact with real estate agents through Zillow’s website and apps in the early spring, ramping up the third week of April and continuing into July.”
To capitalize on this sweet spot, increase your marketing spend at this time of year because this is when clients are most active in contacting agents. To improve your timing even more, the authors recommend: “Make sure you list after the first major influx of new listings for the year. This is usually in late March or the very first week of April, depending upon the weather.”
By the way, NAR’s research shows that the best day to list a house is Friday. Your listing will receive 19 percent more page views, is 12 percent more likely to sell in 90 days and will sell for $500 more per every $100,000 of purchase price.
Letting the sellers know these facts is another way that supports your contention that you can help them net the highest possible price in the shortest amount of time.
The perils of overpricing
Many sellers want to “test the market.” Zillow’s data provides solid proof that this is a bad idea. Zillow “tracked more than 1 million homes listed for sale and found that 47 percent of all sellers end up cutting their price in order to sell. On average, sellers overprice their homes by about 6.9 percent.”
Overpricing harms the sellers in two ways. First, instead of selling at the home’s estimated value, properties with price cuts sell, on average, for about 2 percent less than their estimated value.
The cost in time is even more severe — the average home that is priced properly sold in 107 days versus 220 days for properties that required a price reduction to sell. The data are clear: “… The best course of action for sellers is to price their homes as close to fair market value as possible in order to avoid price cuts at the end slicing into their profits.”
So the next time sellers point to their Zestimate, use other AVMs to support the price you determined on your CMA. Then use the strategies in “Zillow Talk” to market your listings more effectively and to help buyers and sellers be more realistic.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Discover why leading Realtor associations and companies have chosen Bernice’s new and experienced real estate sales training for their agents at www.RealEstateCoach.com/AgentTraining and www.RealEstateCoach.com/newagent.