Management’s go-to is that “the Zestimate is a starting point to determine the home’s value, and isn’t an official appraisal." And therein lies the biggest problem really: it is utterly meaningless. No lender is going to give you a loan based on the Zestimate; it’s not an appraisal, plain and simple. As someone who just went through the process of selling two homes and buying one I can tell you that the Zestimate never played any role whatsoever in determining anything. I never even looked at it. And I looked through Zillow a lot. It’s not because it’s inherently good or bad. It’s because it doesn’t matter. As a buyer I want to know what the list price is and then I want to know what the appraisal is. That’s what matters.
This is less about financials for Zillow and more about the brand equity that it’s earned to date. The company has done a phenomenal job becoming the name in the space. But to my eye today the Zestimate seems like something that poses more downside than upside. The only way that changes is if the Zestimate becomes part of the official transaction and I’m not saying there’s a world where that can’t happen. But given the regulatory considerations in place today in real estate that is going to be a tremendous hurdle to clear if that’s management’s endgame and I don’t think it is. The juice just ain’t worth the squeeze and it’s not in their wheelhouse.
Zillow would be better off just retiring the Zestimate completely and directing those resources elsewhere. Go back to the drawing board and come up with something that solves a problem. I’m sure a $1 million contest is far, far less than what they would spend if they just tried to build upon it in house. But again, the question comes back to what problem the Zestimate actually solves and as far as I can see it seems they’ve still got some work to do. On the bright side for investors at least it seems like they know it.