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Appraisal industry news coverage, including stories about independence requirements, AVMs and appraiser fraud.


Appraisers Claim AVM Overvalues Properties

Appraisal Institute announces Zillow study

Feb. 25, 2010 (updated 3:55 p.m.)

By MortgageDaily.com staff


Residential appraisers are warning that property values obtained through Zillow.com's automated valuation model are no more reliable than an estimate directly from the homeowner.

In a statement today, the Appraisal Institute announced the results of a new study outlined in its quarterly newsletter.

The study was conducted by Daniel R. Hollas, Ph.D., Ronald C. Rutherford, Ph.D., and Thomas A. Thomson, Ph.D. The researchers examined how Zillow's AVM estimates, or "Zestimates," compare to actual sales prices.

The report focused on Arlington Texas, where the trade group said Zillow claims its AVM values have the highest level of accuracy.

The study found that 40 percent of home in the sample were overvalued by Zillow by more than 10 percent when compared to actual sales prices.

The Appraisal Institute cited other studies that said Zillow estimates exceeded actual values by 5 percent.

The authors suggested that the disparity might be tied to the fact that Zillow ignores occupancy in its appraisals, "which has been shown to affect sale prices."

"While Zillow is a helpful tool, it may not be more accurate than the owners' own estimates of value," the authors concluded.

In a written statement to MortgageDaily.com, a Zillow spokeswoman noted that the study was based on values in just a single Texas city from more than three years ago. In addition, she said the sales in the study were taken from 2006 while Zillow AVM values were taken from early 2007.

"It's unfortunate that this study has been structured in such a misleading, and limited fashion," the statement said. "It's also unfortunate that they did not reach out to Zillow to learn more about our approach to home valuation for this study."

The spokeswoman said Zillow company would have embraced the chance to talk with the appraisers and added that the Web site states, "Zestimate home valuation is Zillow's estimated market value. It is not an appraisal. Use it as a starting point to determine a home's value."

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