Bloodhound on Fox
Greg "Bloodhound" Swann CEO of Arizona's BloodhoundRealty.com and founder of the influential Bloodhound Blog, was on Fox news yesterday discussing the Zillow controversy. Greg compared Zillow to WebMD, stating: "if you understand the difference between going to WebMD.com and going to the doctor, then you understand the difference between going to Zillow.com and going to an appraiser".
Greg's statement may indeed be correct - at the moment - but the truth is that Zillow is gaining more and more credibility in the marketplace and among consumers, (the Fox anchorman described Zillow as "addictive"), so perhaps in a few short years, people may not assume Greg's WebMD distinction. Witness for example Google's metaphoric rise from geek toy in 99 to indispensable tool today, (not to mention GOOG's share price and value).
Lloyd Frink, Zillow's co-founder and President released a statement yesterday addressing the issue; stating in part that zestimates are not appraisals and "you won’t be able to use it in place of an appraisal".
Says who?
If I as a consumer want to use a zestimate as an appraisal can Zillow or anybody else realistically stop me? And if my bank or lender wants to accept the zestimate as an appraisal, who's gonna stop them? After all an appraisal under any other name (zestimate, AVM etc) is still an appraisal, which the Oxford English Dictionary defines as an evaluation or estimate, hence leading to the term "zestimate".
Like I mentioned previously, some lenders in the UK - including SPML and Preferred - already accept AVM's from Hometrack and other companies as legitimate appraisals (or valuations as they're called in the UK), and the market here is growing. I'm not sure what the market is like in the US and North America, but it's will most certainly evolve in that direction.
The case against Zillow reminds me of the Napster trials a few years ago. The music industry got pissed at Napster and their primitave p2p networking system, which they were eventually able to shut down. But that didn't stop the rise of p2p music and video distribution, and no matter what the Arizona Board of Appraisals and others think, they can't stop the rise of companies like Zillow impacting and potentially dominating the market; that's just the power of the internet.
It's time to get with it.
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2 comments:
Now, I like technology as much as the next person, and I believe in handing over more power to the people, but this is just another instance in which we are taking the human gatekeepers out of real estate transactions and leaving the system wide open to abuse. We are literally turning the buying process into a free-for-all, in which he who pushes the buttons on the keyboard defines the value of a home. We may as well install money machines in everyone’s home that print $20 bills.
With these home valuation sites, whenever a transaction is recorded, the data is automatically transferred to the home valuation system, where sellers and buyers can immediately access the information. While that’s not so bad in and of itself, it can intensify the negative effects of real estate and mortgage fraud. If, for example, a property’s value is artificially inflated as a part of a flipping scam, that property’s inflated value appears immediately online. People selling homes in the same area see the numbers and instantly jack up their asking prices. Buyers see property values rising and are willing to pay more. A con artist who knows how to play the game, can pull the strings on the system like a puppeteer, inflating and deflating the market at will.
Now, you might argue that given the proper incentive, appraisers have been known to fudge the numbers, too. You might also argue that these valuation models are even more honest–after all, can’t a computer automatically check whether a property’s value is out of sync with the prices of similar properties in the same area? In theory, yes, but in practice, these valuations are significantly less reliable than what competent, certified appraisers can deliver. In some areas, they may be off by 10%. In other areas, the discrepancy can be as much as 50%. I tried to look up the value of my own house, and it wasn’t even listed.
In addition, these valuations can be extremely old. Based on a valuation model, a bank could conceivably approve a mortgage loan to purchase a house that burned down two or three months ago. Only a human being, an appraiser visiting that house and looking at it inside and out, can determine whether the valuation is truly accurate.
Recently, I sold a home to a client who was approved for a mortgage loan in less than 24 hours. The lender didn’t require an appraisal and never even looked at the house. They relied exclusively on a home valuation model to verify the property’s value. I have seen enough fraud to know that if a seasoned con artist had put together a phony deal, that valuation model could not have detected it, and the deal would have proceeded without the slightest hint of suspicion.
As we rely less and less on the human factor as a system of checks and balances, we are sure to see an increasing problem with real estate and mortgage fraud. Home values will be able to skyrocket overnight without governance, creating a housing bubble that will make the dot.com crash of the nineties look like a soft landing.
When I see customers, clients, and even a few of my colleagues singing the praises of these online home valuation sites, all I can say is “No thanks, I’ll stick with a licensed, reputable appraiser.”
thank for your comments, but you grossly contradict yourself when you say:
"we are taking the human gatekeepers out of real estate transactions and leaving the system wide open to abuse."
well the question then becomes whose doing the abusing humans or computers. yes some forms of technology may make it easier to commit some forms of fraud, but which came first, the fraud or the technology
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