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Estimates of home values from Zillow.com may be no more accurate than homeowners’ estimates of value, according to a new study in The Appraisal Journal’s Winter 2010 issue.

“Zillow’s Estimates of Single-Family Housing Values,” by Daniel R. Hollas, Ph.D., Ronald C. Rutherford, Ph.D., and Thomas A. Thomson, Ph.D., examines how Zillow’s estimates of value, known as Zestimates, compare to actual sale prices. Zillow.com is an automated valuation model Web site.

The authors looked at home sales in Arlington, Texas, a location where Zillow has indicated its data has the highest accuracy level. The authors’ study found that 40 percent of the homes in the sample were overvalued by Zillow by more than 10 percent compared to actual sale prices. The study’s authors suggested that Zillow may not take into account the occupancy of properties, which has been shown to affect sale prices. (The materials presented in the publication represent the opinions and views of the authors.)

Other studies have shown that on average homeowners’ overestimate the values of their homes by 5.1 percent and new owners overvalue their homes by about 8.4 percent. The authors conclude, therefore, that while Zillow is a helpful tool, it may not be more accurate than the owners’ own estimates of value.

Many sellers refuse to believe how much the value of their home may have dropped. In an upward trend it was possible to list a home above the market with the prevailing prices eventually rising to bring the price in line. In the current declining market we have seen the cases where the home was listed above the prevailing market and the subsequent price reductions still kept the price above market as values fell. Refusing to price for the current market caused them "to ride the market down" and end up selling for far less after an extended marketing period.

Check the sales and listings in your area when pricing your home. Analyze each listing history for price reductions and marketing periods to understand what prices your area will bear whether you are selling by owner or working with a Realtor. In many cases the cost of an appraisal might be the best money spent in order to "catch" the current market and not overprice or leave money on the table from underpricing.

The HVCC mandated use of Appraisal Management Companies seems to be squeezing out many experienced appraisers. The bulk of the AMC's take a significant percentage of the customary fee that used to go to the appraiser leaving the same amount of work for less pay. Try using Mercury Networks for your appraisal ordering where the appraiser receives a full fee. Mercury Network was created by A La Mode, Inc., the leading software developer for the lending and appraisal industry. Mercury Network