False beliefs about agency fees cost home sellers thousands

Would you promise to pay a “going rate” for something you haven’t seen? Of course not. But, homeowners selling their houses do just that with buyer agent commissions. And, the cost to the owners is staggering. 

Properties offered for sale on the REALTORS multiple listing service may include an offer of compensation to a broker who procures a buyer. More than 2,413 single-family homes in the City of Madison sold this year in the RASCW MLS. Only 174 of those sales included a cooperating broker fee offer, paid by the seller, at anything less than three percent of the purchase price. Once published, the owner is locked into paying that amount, regardless of the terms of the offers. In seventy-two percent of the sales, the owners committed to pay a 3.0% commission from the start…without seeing an Offer. Please, somebody, tell me why.  

The Cost of the 3.0% Buyer Broker Fee Myth

Owners need to know a costly myth about cooperating agents has always been out there, and it survives today. The legend says agents working with buyers won’t show your property unless their compensation is 3.0% or greater. Illogical concepts should die quickly, and yet this one doesn’t. If there was ever a time when a real estate agent could hide listed properties from buyers, those days are long gone. Zillow and similar consumer-friendly sites display homes for sale regardless of the commission the seller offers to pay. The person who offers ZERO percent before seeing an offer will have their house seen on the internet by the same people who see the neighbor’s 3.0% compensation promised place. Does anyone want to challenge that?

Too Few Homes. Many Buyers. 

Markets like this will end one day. When the market turns to favor the buyer, home sellers won’t be able to control negotiations like they can today. Clients of Essential Real Estate learn the facts as we expose the myths. More of our clients offer less than 3.0% commission to the buyer agent and wait until they see an offer to negotiate on the commission. A typical seller offers 2.0%, and because they receive competing offers, they usually pay only 2.0%. Competition and short supply have a way of making anything look better than nothing. 

Discuss this topic with agents

Questions often asked by home sellers have little to do with developing a strategy for increasing the Net proceeds for the seller. That’s too bad; the reason a home is for sale is all about the net proceeds. Increasing your net can be accomplished by increasing the price (provided someone will pay that price) or decreasing expenses. In this market, it’s possible to get higher prices and cut costs. 

If you promise to pay any amount before you see what you’re getting, there is a good chance you’re going to pay more than something is worth. Doesn’t it make sense that an offer of $2,000 below your bottom line on your $400,000 house is a lot more attractive if the fee is 1.0% less? We can do that math without a calculator. 

How much should we offer?

Think broad strokes; time, security, money. Offer as much as you are comfortable and able.

Finally, a house in your first-choice neighborhood came up for sale. You’re one of many people waiting and watching for an opportunity to move into the community. Most likely, you and several others will sit down with an agent to write an offer, and I am sure of this; everyone will ask their agent the same question, “How much should we offer?” 

How much SECURITY do we offer?

I think you should offer as much of everything as you can and still be comfortable. By everything, I mean security and money. Security is time and assurance. Before deciding how much money to offer, know your strengths. Are you able to cover a few thousand dollars in unplanned expenses? Is there work you’re willing to do? Can you give the seller their choice in closing dates? Do you have the necessary documentation to prove to the seller that you have the money in the bank, or that the bank is committed to loaning the money you need? What can you put in your offer, or exclude that gives the seller the evidence that you are as committed to getting to closing as they are? I don’t mean a love letter, either. The kind of information that a seller sees as proof of unequivocal commitment is not something we say, but something we can prove, show, promise, and back with an acceptance of risk. 

How much money do we offer?

Sales of relevant homes in the neighborhood will be used by an appraiser to place a value on the property. Your mortgage lender will loan an amount relative to the appraised value. Regardless of the price you offer, the appraisal will be what the appraiser decides it to be. If the asking price is $400,000 and you offer $410,000 or $390,000, and the seller accepts your offer, you’re okay unless the appraiser decides $380,000 is the value. In that case, you may need to come up with the difference in the purchase price and appraised value.   

I can not assure anyone that they can get a home for less than the asking price. I can tell you a combination of Seller-favorable terms and a price at or above the asking price will improve your chances of an accepted offer. To set yourself apart from everyone else, regardless of the price you offer, show the seller that you have the means and are committed to keeping the price as agreed if the appraisal is less than the sales price. Doing this is a significant offer of security. So is allowing the seller to select the closing date. Saying I’m flexible means nothing. Structuring the contract’s terms to enable the seller to choose a closing date shows the seller that you are. 

Contingencies. Less is More.

Every real estate agent or an attorney can wrap your offer in so much plastic bubble wrap that you can’t possibly be hurt. Your offer won’t be accepted, but if your goal is not to hurt and not own the house, then wrap it up as you wish. Contingencies were created to protect someone from something someone fears. If you don’t have that fear, don’t include the contingency. Fewer contingencies increase the feeling of security the seller has, which’s a good thing for you. 

So, how much should we offer?  Think broad strokes; time, security, money. Offer as much as you are comfortable and able. 

Lead Paint Test Waiver. Did you check the box?

After trying and failing to get their Offers accepted on other homes, a couple finally outbid the competition. All that was left was for the seller to sign the Offer and send it back to the buyer. And that’s when the listing agent noticed an unchecked box on the Lead-Based Paint Disclosure and Testing Contingency, Addendum S. Instead of accepting this Offer, the sellers, facing an approaching deadline, decided to go with their second choice Offer. Once again, this couple came in second, and their search continues. What’s most painful this time is the reason they didn’t get the house was not their fault. The error is common and avoidable.

The Offer defers to included

Unless a buyer elects to waive the Lead-Based Paint (LBP) Testing opportunity by merely putting an X in a tiny box, the contingency becomes part of the Offer. Homes built before 1978 may have lead-based paint or lead paint hazards, such as lead dust, chipping, peeling paint. It’s safe to assume homes built when lead paint was prevalent will test positive for lead. And when they do, the implications are complex and everlasting. Given a choice, home sellers prefer not to have their homes tested for lead paint, and buyers who want to own older homes don’t test for lead paint. The presence of lead results becomes a permanent disclosure obligation from here to eternity. 

But I don’t want to test for LBP

The penalties for sellers and real estate agents for denying a buyer the opportunity to test for LBP are severe. The lead issue is considered a serious health risk by the EPA. Their tolerance for even the appearance of creating roadblocks to pre-commitment testing subject the parties to significant financial liability. For that reason, the LBP Testing Contingency is a condition of the Offer, and the only way to remove the contingency is for the buyer to waive it. Unless the buyer waives the contingency (and they can do that by merely placing an X in a box indicating they choose to waive), proceeding with the Offer will put the seller in a position of discovering the house has lead paint. With that knowledge comes the unpredictable and expensive obligation of mitigation to a level acceptable to the EPA. The closing with this buyer will be in jeopardy. The chances of selling to anyone else are uncertain. If you don’t want the LBP testing opportunity, you have to make sure you waived. 

A Counter Offer is Not an Option

A simple counter offer is all that’s needed to remove a drafting flaw or an unfavorable condition in an Offer. Unfortunately, when the issue is an LBP test, the seller is wise to avoid doing anything that looks like they are committing the buyer without allowing the test. Attorneys have advised using a counteroffer from the seller to the buyer could be interpreted as the seller’s act to deny the right to test. The safe route for the seller who has multiple acceptable offers, including one with a testing contingency, is to seek an attorney’s advice. When there are other acceptable alternatives on the table, it may be safest for the seller to turn to one of the other offers and move forward with one of those.   

An avoidable flaw

It’s not the seller’s or the listing agent’s place to try to fix a flawed offer if the seller has an offer they want to accept. We can suggest changes and explain options. It’s up to the buyer’s agent or attorney to make sure the Offer accurately expresses their client’s intention. Failing to check the box to waive the LBP test is a common error. And it’s avoidable. 

Earnest Money. The high-impact game changer in real estate negotiations.

The simplest way to make your Offer stand out to the Seller when competing against multiple Buyers is the amount of earnest money you propose. Often overlooked, the earnest money is a low risk, impactful psychological difference-maker in residential purchase negotiations. The agent who suggests a buyer-client offer the least or typical amount of earnest money unintentionally undermines an otherwise impressive Offer. 

Buyer-favorable rules protect the earnest money

Earnest money is a downpayment a buyer may submit with their Offer or after their Offer is accepted by the Seller. (Some states refer to acceptance as ratified.) Acceptance, unless otherwise agreed, happens when both parties sign the identical Offer stating they accept the terms as written. Once deposited in a Trust Account, Wisconsin law determines where and when earnest money goes to the Seller or the Buyer if the transaction doesn’t close. For reasons we won’t get into, ninety-nine percent (or greater) of residential offers include a promise to present a personal check within a few days of acceptance of the Offer. Because you put no money on the line until the Seller commits to you, it’s easier to promise to pay an amount that may persuade the Seller of your sincere commitment. 

Typical Amounts Tell The Seller You’re Typical

If you were the Seller and not the Buyer, given a choice, if all else is equal, do you choose to commit to the typical Buyer or the Buyer who impresses you as most ready, able, and engaged? Which one is most likely to get to closing without stumbling? Of course, it’s the person who puts their money where their mouth is. 

Typical earnest money is one percent of the purchase price. On a three hundred thousand dollar offer, $3,000 is the amount the Seller is most likely to see offered by typical buyers. It’s hard for Sellers to ignore a good offer with substantial earnest money, and the Buyer who makes that Offer is one with whom the Seller is likely to want to find a way to come to terms. How much money is substantial? If you’re going to put down 10%, half of the downpayment is certainly noteworthy. 

The Greater Your Risk, The Greater Your Commitment

You and I know that earnest money rules protect the Buyer from the risk of losing their earnest money except in cases of breach of contract. Don’t take my word for it; talk to real estate attorneys who resolve earnest money disputes. Even the Buyer who acts in good faith might still find a seller reluctant to release earnest money at first. Lawyers know that even in the cases of intentional breaches, the Seller’s best option may be to release the Buyer and move on to the next Buyer. Cases that don’t end in mutual release with no money going to the Seller are more likely to end up with money divided between the Seller, lawyer, Buyer, and lawyer. 

Earnest Money Tells Your Level of Commitment

A person’s commitment to getting to closing is evident by the terms included or excluded from their Offer. Contingencies that provide opportunities for a buyer to reconsider or renegotiate are neon-light red flags. Conservative amounts of earnest money send a message that you’re cautious. The typical home buyer is cautious. In competition, you do not want to appear cautious, or typical, or common if you are none of those.  

Bold, confident, committed, fearless Buyers are ideal partners for risk averse Sellers in a real estate transaction. Promising more earnest money is a simple, low-risk way to complement a well written, contingency-light Offer to purchase. 

A Simple Mistake That Gets Offers Rejected

Smart home buyers are modifying their Offers, promising the seller that they will accept the first ($2,000.00, $3000.00, $5,000.00) in repairs of conditions identified in the home inspection. This safety net inspection contingency gives the seller the security that comes with believing the buyer will not renegotiate over minor issues. Difference makers like this one are often the reason a home seller selects one Offer over others. 

Safety Net Inspection Contingency—Very Smart

A batch of offers on several properties caught my attention this summer. They all had a similar version of the same contradicting, Offer-killing contingencies. The safety net inspection contingency became diluted by a risk-to-the-seller condition of a radon test. Each of the Offers with these contradicting contingencies suffered the same fate of REJECTION. I think this is an avoidable error made when agents or lawyers draft offers and include the radon testing contingency for the wrong reason—protecting the buyer from radon gas. I’ll explain it.

Radon Test $200. Mitigation $600 – $1,200

First, a radon testing contingency will not protect anyone from radon. The contingency only allows the seller to install a mitigation system before closing and give the buyer a retest, showing that the radon level is below an agreed-upon rate. The least expensive EPA approved mitigation method is about $600. I’m sure there are some oddball examples, but ask any mitigation specialist to show you what they’ve charged in the last three years, and you will see $1,100 -$1,200 is typical. The chance is excellent; you can reduce radon in a home to a level below the EPA action level, with a system that is not detrimental to the house’s look for $1,000 +/-.  

Be logical to avoid defeat

A radon test is paid for by the buyer at the cost of $200.00. The buyer who is willing to cover the first $2,000 of the inspection identified defects can save the $200 test cost and install a $1,200 aesthetically pleasing, effective system. It’s illogical and self-defeating to say the seller we will cover the cost of fixing things that cost $2,000, but we will make them cure a condition that will cost only $600 to $1,200. 

Torpedoed By Radon Testing

When comparing Offers, it’s easy to eliminate some because they’re poorly written, have flaws, or are high risk for the seller. In the end, there are usually two or three Offers to decide between. With all else relatively equal, the radon testing contingency torpedoes otherwise acceptable Offers. 

When drafting Offers, it’s wise for the agent or lawyer or buyer to review before signing and ask two questions, WHY IS THIS CONTINGENCY INCLUDED? And DOES THIS CONTINGENCY CANCEL OFFSET ANOTHER CONTINGENCY?

Avoid Training. Pursue Learning

Learning is not training. Contract flaws like this illogical combination of conditions repeatedly happen because training doesn’t require a person to make an effort to learn (in this case, radon is deadly, everywhere, and mitigated inexpensively) the issues, and understand the implications of contingencies. Training tells you what to do. Learning is when you know why you’re doing it.

We often say we can write a safe offer to wrap a buyer in bubble wrap contingencies so that the seller won’t accept the Offer. When a person isn’t committed to owning a property, bubble wrap contingencies will help keep them out of danger of owning. But when a person commits to own, it’s up to us to give them reasonable ideas to make their Offer acceptable. I hope never to see a person lose a home they want to own because an unnecessary contingency makes its way into an Offer.

Service Fees Adjust to Competition. $499 plus 1.0% is our competitive fee.

Costs to be in business, prices set by competitors, and subjectivity are three factors a writer at Business.com suggests when establishing a service fee. According to this New York Times article of May 1984 said the real estate industry lacked “…vigorous price competition among brokers…” According to the writer, the consequences were that the consumer paid a higher price than necessary because they were unaware that there are alternative(s), or discount, brokers who charge less than the standard industry commission of 6 or 7 percent. 

That was then. What about now?

According to a spokesperson for the National Association of Realtors quoted in the article, commission rates arrived at equilibrium due to a very competitive market. Rates were consistently 6-7% in 1984. If that competitive market was the reason, then what’s the reason now? I don’t contend that the real estate commission rate is immune to market changes because of cooperation among brokers. I believe the quoted rate you are most likely to hear from brokers is still six percent of the sale price. The outcome may be similar if firms set their costs before calculating revenue, and project revenue based on a need to cover expenses. By comparing their desired fee to the fees other firms charge, a going rate gets set. Equilibrium is a choice. 

Another Approach Puts the Consumer First 

At Essential Real Estate, we took another approach to price our service and arrived at an alternative rate for Madison, WI area home sellers.

First, we identified why people sell their homes and where the money comes from to pay broker fees. They sell to free the home equity to use for their next life plan. The equity they desire to use gets reduced by the amount of money paid to the broker. To be a service worth offering, we set out to create an alternative that doesn’t deplete home equity at such an aggressive rate.

Second, we built our company to operate on a budget that leaves room for profit. Real estate businesses can load their debit column with the costs of a host of legitimate but not essential expenses. For example, if a broker wants her company to pay for vacations, cars, gifts, personal promotion, charitable contributions, a soiree or three, and still desire a profit to satisfy a lifestyle, more transactions or more money per transaction will be a crucial factor. 

Third, we excel in the essential real estate services. Our fee is only for those services. Real estate agency law sets out the purpose and expectations of a broker. None of those license law requirements have anything to do with spending money on social media, personal promotion, lead generation, brand management, or attendance at motivational seminars in vacation destinations. When a client isn’t paying inflated operation costs, they keep more of their hard-earned equity. 

Pricing Is A Choice

A lot of money changes hands in a real estate sale. The amount of money that goes from clients to brokers is a choice. By choosing to leave more money in our home selling clients’ hands, we created a complete real estate service option for people in the Madison, WI area. Our fee is $499 at the time of signing the contract plus 1.0% of the purchase price at closing. We give our clients insight into how the cooperating broker compensation process works, and our clients make informed decisions to pay the buyer agent a fee of their choice. The typical broker fee might be quoted at 6.0% of the sale price in Any City, USA. Essential Real Estate clients are paying, on average less than 3.5% total commission. 

We exist to provide skilled real estate representation with our eye on your security and a goal to leave more of your home equity with you. Our fee isn’t the lowest. We don’t intend to be inexpensive. We are exceptional where it counts, and we charge only for what matters. 

We need a short form WB-11 Offer to help WI Homebuyers

Twenty people in Madison, WI submitted WB-11 Residential Offers To Purchase on the same home. The homeowner recognizes one of these Offers is not like the rest. The first noticeable difference is physical; it’s much thinner. People committed to keeping a promise require far fewer exit doors and opportunities to change terms later. In competition, less is more. 

Common and Counter-Productive

Nine out of ten agents load their client’s Offer with their company’s Addenda of good ideas and extra-safe precaution contingencies. Addenda can swell the simple ten-page Offer to double or triple the size. The favorable elements of a person’s intentions get hidden in the jungle of contingencies. With more emphasis on learning the content of the WB-11 and company addenda, the licensee could help their buyer clients improve the appeal of their Offer without depending on merely paying more money. Until brokerage firms demand and expect greater comprehension of contracts and far better dialogue of options with the client, Wisconsin home buyers will acquire homes by overpaying and lose homes in a competition by diluting their Offers with unnecessary junk contingencies. We know agents can do much better. First, they have to want to.

Wisconsin Home Buyers and Sellers Need an Alternative Offer

The Wisconsin real estate documents are products of years of evolution of fears. Stick around any industry long enough to see unusual, unexpected, unlikely events occur. When those events happen enough times (like once), someone will suggest a precautionary fix be inserted into the contract to protect 100% of the transactions. It doesn’t matter if the incident is highly unlikely and improbable unless conditions a, b, c, and 1, 2, 3 occur. If the person who offers the solution to the problem that doesn’t exist has the respect of the forms committee leadership, the answer could make its way into the Offer. Enough time and enough ideas allow a one page Offer to Purchase to grow to ten to thirty pages. And when the person filling in blanks and checking boxes only knows which blanks to fill in and which boxes to check, the least risk-sensitive, most qualified, committed person’s Offer will come out looking just as reserved and non-committal as the least capable buyer. For the undereducated licensee’s client, there could be an alternative simplified Offer. 

Remove Optional Contingencies

The Offer most appealing to the home seller looks like this:  I, Tom Meyer, Offer to purchase your real estate at ____________address for $___________this amount of money. I will give you the payment in full on __________this date provided you give me the deed to the property and a clear title. 

Beyond these two sentences, there could be a few paragraphs of understanding as necessary by Wisconsin Disclosure law. By eliminating pre-written contingencies that are intended to be optional but become standard because the contract drafters defer to including every condition without learning the consequences and explaining those consequences to the consumer, some home buyers will benefit. A clean and simple Offer doesn’t include extra safety conditions for the buyer client. That’s not a problem if the safety the condition provides is inconsequential to that buyer. In these scenarios, safety becomes a detriment.  

Give the Buyer an Optional WB-11

One advantage of having an Offer prepared by an attorney is the attorney is not obligated to use the WB-11 form. A lawyer could craft a simple Offer that gives the buyer only the protection they need and appeals to the owner’s interest in simplicity. Real Estate Licensees are not permitted to create their Offers, and the extent to which we can modify prewritten documents is limited. The WRA and the State could collaborate on a simple Offer document. Eliminating optional contingencies and striking redundant sentences will allow home buyers to make their Offer stand out without relying on overpaying. Home sellers will benefit by being free of problematic junk contingencies. We can’t protect everyone from everything, but we can give people a choice to represent themselves as the ready, willing and committed person they are. 

A Wise Pricing Strategy. Your Choice.

With a lifetime of home value pricing conversations behind me, I can say homeowners are likely to expect one of two outcomes. One is to feel good about the price, and the other desires to have a strategy that gets them from here to there safely. The majority of people we talk with hope to be part of the conversation and are receptive to relevant facts. Most home sellers are sincere about their intentions, and they’re eager to choose a wise pricing strategy. These are the people who have real opportunities to make this seller’s market work for them. 

Gathering Facts

Home sellers who win know they are selling because they want the equity from their current home to do the next thing in their lives. Until a person is committed to the next thing, testing the market will be tempting. It’s a lot easier to trust facts when those facts appear to contribute to a plan to accomplish the objective. When the aim is not defined, testing is a way to stall and buy time. We set out to gather relevant facts and separate them from the irrelevant. The process looks like this: Four homes sold in the neighborhood in the last six months. Two are on the same street. They are all similar in age, size, amenities to the subject home. The prices range from $320,000 to $350,000. A few blocks over, the road leads to a new subdivision. One person sold a drastically different, yet relatively close-in-size home for $625,000. Even if the homeowner likes their home and location better, the six hundred thousand dollar home sale is irrelevant to the subject home’s value. The homeowner who wants to use the expensive house to calculate relative value will hamper the opportunity to negotiate price and terms.  

What Someone Thinks or Wants are Facts…but not relevant.

We all want something sometime. We all think some things are better than others. No one wants to leave money on the table. Those are facts. They are not relevant to determining a wise pricing strategy, except that they are facts to disregard. We might as well acknowledge these facts, and then agree to set them aside. Keeping them in the conversation keeps us from our goal of creating a strategy that accomplishes your intentions. 

Opinions. Everyone’s got one. 

Neighbors are great at hindering your sale. Tell your neighbor your REALTOR recommended a specific price for your home and watch what happens. They’re going to tell you the price is low. “For your house? No way. Your house is worth a lot more than that!” I’m confident of this too: Talk to three REALTORS. Tell them the price another agent suggested, and might get a similar response from one or two. The same way the neighbor wants to avoid offending you, the agent hopes they can impress you by enticing you with the opportunity for more money. Now, the REALTOR might be more likely than the neighbor to have relevant facts to arrive at their opinion. Ask to see those facts. 

Agree on the facts. Put them on the table. Decide what matches your objective.

After stating my opinion and showing the facts I used, restating the objective of the seller as I understand it, sometimes owners want to see if an opinion or irrelevant fact will change my opinion to better align with their hope. My answer is always the same. If this is still your objective, the facts I presented are still the relevant facts, then my opinion can’t change. It’s not my place to be agreeable or disagreeable. The question I set out to answer doesn’t change with more information unless the information corrects what I thought was a fact. I’m not concerned with offending you. I’m concerned with presenting you with a strategy based on facts to accomplish your intention. If a person is offended, it’s because their intention has not been stated.

Net Equity, Not The Purchase Price, Is The Prize.

We think of the residential real estate sale as a price transaction when, in fact, it’s a trade of NET EQUITY. Price and expenses are factors in the formula to calculate a home seller’s home equity. PRICE – EXPENSES = EQUITY. By keeping eyes on equity, real estate agents have many more options to craft Offers sellers are likely to accept. 

 Selling our homes is how we release our home equity to do the next thing. By focusing on NET EQUITY, not price, we avoid the consequences of agreeing to expenses that deplete our equity and terms that leave negotiations open. By structuring our Offers to reduce the owner’s costs to sell, we increase their NET EQUITY and improve our chances of getting our offer accepted. The price is only a participation trophy. The actual money and the security of a sure thing is the real prize. 

Price is misleading

Homebuyers who only know how to improve an offer by increasing the price will pay a premium in negotiations. The buyers who provide the seller with secure terms and a reasonable price receive accepted offers and probably retain some unspent equity by not overpaying. To pay a reasonable price without being the highest price offer on the table, increase the Seller’s Net Equity after the sale by decreasing the Seller’s costs to sell.

The Secret Is Knowing Where The Money Is In The Purchase Agreement

You’ll find those opportunities to improve your offer without increasing the price throughout the Offer. There are at least two places on the first page of the WB Purchase Agreement, and at least six more throughout the 10-page offer.

At Essential Real Estate, we know how to make the Offer work for our buyer clients, when the goal is to be the most attractive buyer. The same strategy works to give our seller clients every opportunity to eliminate risk and increase the amount of the equity check they’ll receive at closing.

REALTORS Who Respect Zillow Earn Public Trust

REALTORS, please stop resisting Zillow. They have the trust of the public. Zillow has the power they have because they figured out how to involve the consumer at the REALTOR expense.  Embrace Zillow the way the public does.

Embrace The Zestimate—It’s Your Opening

Given this choice as a customer, who are you more likely to trust and engage in a conversation: (1) The person who tells you you’re wrong, you’re making a mistake, and you’re in danger. (2) The person who compliments you in being proactive, smart, informed, and wise. Number 2 of course. When people recognize our intelligence and wisdom, our opinion of them goes up. Still, when allowed to engage in a real estate conversation when Zillow is the topic, agents tend to go straight to the party line with flawed criticism. Opportunity Lost! 

The wise REALTORs know everything Zillow wants them to know about Zestimates. And they want you to know: Zillow knows the Zestimate is not as accurate as you can be.  Here it is in their own words:  It is not an appraisal and it should be used as a starting point. We encourage buyers, sellers and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.

https://www.zillow.com/zestimate/ This link takes you to Zillow’s stats for Zestimate accuracy by State. In Wisconsin, Zillow tells us up front, they are accurate within 5% of the sales price 82% of the time. Do you know what they call REALTORS who estimate a home’s value within 5% accuracy 82% of the time? Ex REALTORS. For those who point out Zillow reports that they are within 20% of the correct price, 99% of the time, consider what that means. Zillow will be wrong in every opinion. And the error could be up to 20% of the value. (A $400,000 home with a 20% error is off by $80,000.) 

Consumers Like Opinions that support theirs

Some consumers will look at an explanation of analytics after they see or hear an opinion. But that takes work. A typical consumer looks at their Zestimate and their City Assessment and decides if the number is right or wrong based on how they want the number to factor into a formula. Show me one homeowner who’s Zestimate is higher than their assessment to go into the City and demand their property tax bill to be increased. Should that Zestimate be lower than the assessment, I’m sure the assessor will soon be seeing the Zestimate as evidence. 

Never Right or Wrong…Just a Start

The Zestimate and the consumer are never necessarily right or wrong. The number is a product of analytics but the analytics still require your input. The consumer who begins with Zillow is smart. Being informed is always better than being at the mercy of someone who has an opinion. 

Attempting to undermine Zillow is futile. REALTORS who try only undermine their credibility and that of other real estate professionals. Those REALTORS who learn how Zillow works, why Zillow works, and align themselves on the public’s side with respect to Zillow will be the REALTOR of choice for people who like to be respected. It’s far easier to work with people who respect you, trust you, appreciate you for not criticizing them.