How to Overcome a Bad Zestimate

Have you ever had a bad Zestimate result in an overpriced listing?  If you haven’t yet, you’re lucky.

As increasing numbers of homeowners trust Zillow for pricing
information, many agents report inaccurate Zestimates are becoming a
major issue.

Here’s how to overcome them.

Understand The Forces at Play

A Zestimate becomes an issue when it’s the first value a seller sees.
 This is because of a powerful psychological bias called anchoring.

Anchoring describes the common human tendency to rely heavily on the
first piece of information offered (the "anchor") when making decisions.
 If a seller checks a Zestimate before seeing your CMA, the Zestimate
acts as the anchor.  The more inaccurate the Zestimate, the more it can
hurt your chances of getting a realistic list price.

The bad news is the effect of anchoring is all but impossible to
eliminate.  The good news is you can minimize it with the right
approach.

Gather the Data

If you haven’t already, bookmark or print out Zillow’s “What is a Zestimate?” page (zillow.com/zestimate).  Among other things, it explains the error rate for Zestimates and says sellers should not use Zestimates for pricing their homes.

Next, before you go on a listing appointment, be sure to check the
Zestimate.  If you believe the value is off, look at the comps Zillow is
using and compare them to the comps on your CMA.

Print out both sets of comps and prepare yourself to discuss any
discrepancies.  Also, come prepared with detailed explanations of any
adjustments you’ve made.

Ask Questions

Research shows asking questions is more persuasive than making
statements.  Unfortunately, most agents try to overcome bad Zestimates
by making statements backed by the data they’ve collected.

It’s rarely effective.

Start by asking the sellers if they read the “What is a Zestimate?”
page.  Odds are, they didn’t (that’s why you want it handy).  Let them
read the relevant sections and then ask, “Would you agree that if Zillow
says Zestimates aren’t to be used for pricing, we shouldn’t use them?”

If you gain agreement on setting aside the Zestimate, it’s time to go to
your CMA.  If you’re unable to gain agreement on setting it aside,
you’ll need both your CMA and the comps from Zillow.

Walk the sellers through one comp at a time.  Ask them to point out the differences between their home and the comp.

Whenever possible, ask a question instead of making a statement.  Turn,
“Pools are worth an extra $20,000” into, “Did you know homes with pools
sell for about $20,000 more than homes without pools?”

The difference might seem small, but turning statements into questions
is the single most important thing you can do to overcome a bad
Zestimate.

P.S. – Anchoring is why you should never give a seller a ballpark value
before viewing the home and preparing a CMA.  If your estimate turns out
to be wrong because of unexpected factors (like condition), you can
accidentally set an anchor that will work again

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