There’s a log cabin with an above-ground pool in the middle of Petworth according to Zillow. That sounds silly, doesn’t it? Check out the listing: https://www.zillow.com/homedetails/4406-Kansas-Ave-NW-Washington-DC-20011/477869_zpid/
And here’s what s really there:
I came across this the other day and asked myself if there’s a log-cabin falsely listed in the heart of DC’s hottest area for flipping what else is incorrect on these free house value sites?
Curious about what other people think about the legitimacy of sites like Zillow, Trulia, Redfin, etc., I asked the WCP team and took to BiggerPocket’s forum. I’ve found there’s an ongoing debate in the REI community about whether or not to use these free house value sites to find comps. Some investors refuse to use these sites at all, sticking to the MLS and others who don’t have access to the MLS use them to find “ballpark ranges” for their comps. What I’m going to share below is not to discourage the use of these sites, but to encourage the use of these as only “reference sites.”
If you’re going to utilize these sites, I advise against using them as your main source for obtaining comps. Instead, use a listing’s information as a “reference.” As you now know with my log cabin example, property listings can be completely inaccurate. After I saw the log cabin pictures on Zillow I searched the same address on Redfin and found their listing had the correct pictures of the rowhouse: https://www.redfin.com/DC/Washington/4406-Kansas-Ave-NW-20011/home/10041618 Even with the correct pictures, you can see that the Redfin listing is missing the last sold price. It’s time-consuming but very important to cross-check a listing on several websites to determine if the information is consistent and accurate.
So why the lack of consistency? I did some research and found 2 main reasons:
First, the algorithm that sites like Zillow, Trulia, etc. use for their estimates (ex: Zestimate) are unable to determine which neighborhoods within a 2-mile radius are the most similar. Regardless of if your subject property is in a cul-de-sac or situated on a busy road, the algorithm simply draws an invisible circle around the property and uses everything in it to determine value. This means that the comps generated by these sites are not nearly as similar as your subject property.
Second, new investors need to understand that these websites are not pulling information from the MLS. They are third-party listing portals that agents use to advertise their listings. Once a house has sold, the listing agent should manually go back to the website and update it. Often, this doesn’t happen and the listings are dated and incomplete. This doesn’t mean that all properties on these sites have inaccurate information, but when it comes to generating accurate comps for your next deal, it’s simply not worth the gamble.
The debate may go on about which free house value site is better but overall there is a consensus on the MLS being the best way to get accurate information on a property. What makes the information on the MLS so accurate is the system of checks and balances in place. Agents are listing properties, physically accessing them, and updating wrong information. To discourage inaccuracy, fines can be given for wrong information.
If you’re not an agent and don’t have access to the MLS, the best way to get accurate comps is to cultivate a relationship with a realtor. Most realtors are willing to pull comps for you if you bring them your business.
But don’t trust comps pulled by anyone. I’ve heard of realtors specifically picking comps with the highest value over others, benefitting them more than you. Make sure you are properly vetting any agent you want to join your team and telling them exactly what you’re looking for in potential comps.
Another way to obtain comps is to ask us! Our Sales Executives understand the areas, have access to good quality comps and can provide you with them free of charge. We understand how crucial it is to get the most accurate information when determining the profitability of your next flip and we’re here to help!