What is a Zestimate, and are the banks accepting to these?

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May 05 2011 - Pasco
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No. Banks, though, all use similar AVMs - automated value method - which is what Zillow is... Zillow is a public, free AVM, all banks use their own AVM in the pre-qualifying process.

In other words, if you are looking for a $400K loan, and the banks AVM says your home is worth $100K, well they know right away. Before AVMs, they would have to send out an appraiser.

So, are they 'accepting' AVMs ? Only if your loan is small relative to your homes value. Otherwise they use appraisals.

And NO, no banks use Zillow exclusively, as their AVM. They might look up your address and see the Zestimate, but no decision making is done based on Zillow or their Zestimates.

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May 05 2011
Vince, with all due respect, but I would really love to make it illegal for any bank to hire any appraiser to conduct an appraisal from which they will decide to approve a loan.   In my opinion, the banks by doing this have exerted themselves as an authority over local elected government tax appraisers.   It is not wonder that our local economy, and our States are going bankrupt.  Devaluing property based on what has historically sold at with which to approve future loans is a spiral down senselessly stupid proposition.   Realtors are also contributing to this dilemma, by encouraging sellers of properties to sell lower, just so they can make a quick buck!  Housing market Hari Kari, reinvented. 

The only winners are the God Damned banks who are stealing our property values, yet not reducing our mortgages.  Something needs to be done to correct this stupidity.  My home value will keep decreasing if this continues, and our local governments will also continuously be experiencing decreasing tax revenues if we continue with this stupid practice.
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May 06 2011

It is my opinion that the banks appraisal to make a decision on whether to approve a loan or not is illegal.  I have recently written a letter to President Obama, and still plan to write several other letters to consumer protection aagencies regarding this fact.  In review of what is happening, the banks appraisals are black boxes bought by the banks, and therefore not independent of them.  Too many people are being denied bank loans based on these black box bank loan appraisals.  The bottom line is that in some instances the banks are superimposing their appraisals over those that the local government agencies do every year to collect property taxes.   When a bank disaproves any bank loan below the tax appraisal value of a property, this should be view as a crime.  A bank should never be empowered to disapprove any loan if there is a qualified buyer that can afford to repay it, and banks must not be allowed to conduct any property value appraisal as that is not within their authority.   What is happening, is that with this practice, the banks are driving the housing market down, devaluing property based on what historically has sold at instead of the true taxable minimum value of a property.  In turn this is lowering tax assessments over time and eventually shorting the local governments and the States of tax revenues.   The impact is national, and no one is noticing.   It is like a frog that is placed in a pot that will slowly boil.  Unless you realtors do something about this and unless we property owners also object vehemently about what the banks are doing--- essentially devaluing our properties we will all end up in a total upside down market.  Owners who will want to sell will all have to either short sell, REO the property, or lose all equity to these bastards we call banks.

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May 06 2011
Wish I would have read Staci's second comment and the linked article before responding. Would have saved me wrist inflammation. Great article Staci. Sums it up pretty well.
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May 05 2011

Guilrl,

Staci is right. The banks do not use Zestimates in determining value for underwriting loans or approving short sale offers (if only it were that simple!). The Zestimate is obviously the result of an algorithm dependent on raw market data. In my opinion based on observation, it seems that Zillow is relatively acurate in highly conforming subdivisions and neighborhoods - ones in which there is not too much difference in size, function, age, or appearance of the homes or the land - but not very good at assessing lot premiums associated with such things as views or beachfront or lot discounts for homes backing onto retail space or busy roads, much less for differences in remodeling, architecture, and other aesthetic and functional considerations between the average home and the subject home.

The banks undoubtedly have internal software that approximate the results of the Zestimate. They use the value ranges that this algorithm produces to determine whether or not to move forward with loan mods or short sales (if offers are within acceptable range), but they refine their internal impression of value by hiring a local real estate broker to provide his/her expert local opinion (called a "Broker Price Opinion" or BPO) in the case of determining value for a short sale and they hire a local appraiser (with the borrower footing the bill) in the case of a new loan because they recognize the limitations of relying on uninterpreted data as well as the value of the knowledgeable, if subjective, opinion of the local real estate expert.

This approach is exactly how consumers should use Zillow: as a first stab at approximating value, or as a logic check against other opinions or sources of information. Zillow is a very valuable tool, and will certainly be improved upon, but at the moment there is no substitute for a good Realtor, particularly if your home or the home in question is not of the cookie-cutter variety.   

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May 05 2011
That's an interesting question.  I asked myself the same thing a few weeks ago and came across this article in The Wall Street Journal.

http://online.wsj.com/pub ... 0214.html

I hope this helps to answer your question.
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May 05 2011
I understand.  My question really should have asked if the zestimate is as accurate as that used by the bank for approving a bank loan?
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May 05 2011
Hello,

A zestimate is an estimate that Zillow makes for the value of your home.  Banks do not use Zestimates in determining whether or not they will carry a mortgage. 

Staci
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May 05 2011
 
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What is a Zestimate, and are the banks accepting to these?
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