"The Zestimate makes the phone ring."

That was one of the first things Dean Ouellette, an agent with Realty Execs in Chandler, AZ, told me in a recent conversation.

"When the phone rings from a 'Zestimate call,' that means I have someone interested in buying or selling real estate on the other end of the line. Zillow got me the initial contact - now it's my job to convert that caller into a client."

And if the caller thinks the Zestimate® home value is way off?

"Good! That is a prime opportunity for me to display my expertise as a real estate pro and demonstrate why a professional is needed to properly price a home, among other things."

Dean sees "Zestimate calls" as an opportunity to educate prospective clients who want to know more about how their homes, or the homes they're shopping for, are valued. Dean - along with many other agents I've spoken to - has found that, armed with a fundamental grasp of how the Zestimate is calculated and the area-specific data in Zillow's Zestimate Accuracy Table, it's easy to help a client understand what the Zestimate is, what it's not, its benefits and limitations, and how it can be properly used.

What is a Zestimate? (And what it isn't, too)

Let's take it straight from the horse's mouth - here's how Zillow defines the Zestimate:

The Zestimate home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value. The Zestimate is calculated from public and user submitted data; your real estate agent or appraiser physically inspects the home and takes special features, location, and market conditions into account.

Note one very important point: The Zestimate is not an appraisal. It's a starting point. It's fantastic for looking at valuation trends. It's a great way to get an idea of what homes in the neighborhood may be worth - but it's not a replacement for a professional's opinion of value

There's a saying I've used countless times: It's a Zestimate, not a Zappraisal or Zprice.

Simply put, there is no way a computer algorithm can see inside a home or know a neighborhood. We can't tell if the neighbor's dog barks incessantly, if the house across the street is painted purple with a 1974 VW Microbus up on blocks in the front yard, or if the home for sale has meticulously hand-carved built-ins made from imported European hardwoods. As a real estate professional, you know that all those things (and many, many more) affect a home's value.

If you are challenged by a client who says, "But Zillow says my home is worth…," do what Dean does: Educate the consumer on how the Zestimate is calculated, what goes into it - and what doesn't.

Zestimate discussions are a prime opportunity to show your client why you are a real estate professional. You can do what the Zestimate cannot, and you can do it very well.

Some clients might believe that lenders use Zestimates for loan valuation purposes - here's another chance for you to share your expertise: If any lender is engaging in that practice, they are violating our terms of use (TOU), which state: "Without limitation, lending professionals and institutions are prohibited from using information provided by Zillow Group through the Services in making any loan-related decisions."

Now, I am not an attorney, and TOU language sometimes requires a law degree to decipher. But that statement above is crystal clear: Lenders are not to use any information on Zillow (including the Zestimate) to make loan-related decisions.

"People get it. Once you explain to them that the Zestimate is an ESTIMATE, and it's a computer model that uses publicly available data, they'll usually start to nod their heads in understanding," said Dean. "Then you go in with 'the Zestimate can't see inside your home,' and they really get it."

Dean notes, "When presented with Zillow's own data on Zestimate accuracy, even those totally hung up on what the Zestimate says see the light."

Bring it up first!

Dean had some very sage advice for getting the Zestimate conversation out of the way up front.

"Everyone is on Zillow. Many of my clients have 'Zillowed' their home before they even contact me. So I bring it up to them, before they usually even think of it."

When he goes on a listing presentation, Dean does what most competent agents do - he prepares a home valuation CMA, brings sample contracts and reviews his marketing plans. He also does something a little different: He prints out a copy of the home's information page from Zillow and highlights the Zestimate. He then incorporates a Zestimate discussion right into his listing presentation.

"Have you heard of Zillow?"

(The answer is usually "Yes.")

"Good, it's a cool site, LOTS of info. Let's chat about this Zestimate," says Dean. And then he will explain how the Zestimate is calculated, stressing that it uses public data and the algorithm is limited in what it can "see." He also has a printout of the Zestimate accuracy table handy, "just in case they are hung up on it."

With the Zestimate discussion wrapped up early on, Dean can then proceed with the rest of his listing presentation.

"A couple of times a client has said to me later, 'You know, Zillow says…,' and I just politely say, 'Remember that discussion we had about the Zestimate?' It's really not that difficult a discussion. Consumers are smarter than we tend to give them credit for," said Dean. "Just tell it like it is, explain how things work. Rinse and repeat as necessary."

Thanks, Dean, for the tips and pointers!

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