Zillow.com is a website that provides data on specific single family homes.
The information is derived from county tax records and is based on sales of single family houses and it then gives an estimate of value.
It should be used a reference tool only and not as the deciding factor for purchasing a property.
While many “newbie” investors, out of state and out of country, use Zillow as a tool, I can assure you, that a lot of opportunities will be missed or you will pay too much for a property if you don’t consider other pertinent factors that impact its value in the current local market.
You see, Zillow reports sales as they happen and because of the time frame of when these sales happen, you could have a much distorted view on today’s values. I see this all the time as I go about my business of acquiring houses in the metropolitan Atlanta area. When I buy at auction I preview all the properties and in the course of business, I always want to see what my competition sees as value.
In many cases, the square footage is wrong because in Georgia, it’s usually never listed on the MLS because the assessors have it wrong. Often they miss finished basements and the square footage is off significantly which the Zillow observer would never know unless they got inside the house.
Zillow never takes into consideration the condition of the property thus you could be off $10,000-$90,000 on a particular house if it was vacant for a long time, vandalized or simply not taken care of.
In a fast moving market, whether upward or downward you could easily miss the book on today’s values unless you carefully look at the dates of sale and try to produce a trend on values based on the time frame.
But here’s the big thing that will distort your perception of values on a specific date and time:
If a neighborhood went down in value as a result of the Great Recession and there hasn’t been any sales there, then you have completely unrealistic values because of the lack of current sales!
Zillow is a great tool for fast information but nothing takes the place of common sense when buying an investment house and in most cases, it requires market knowledge derived from actually being on the ground and physically observing the following: curb appeal, house layout, proximity to shopping, schools, quality of building materials and location within a specific subdivision.
I use Zillow all the time but primarily to see what my competition will be basing their valuation on.