I live in a hot real estate market (L.A.), and I've spent about 5 minutes (no exaggeration) looking online at the prices of houses in my neighborhood, knowing the actual closing price of recent sales, and my first thought was that prices were about 10-20% below market value.
It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.
This is the same in Seattle, where a house's asking price can be 550, its zestimate (or Redfin estimate) will be around 570, and the price it actually goes for invariably ends up around 700. This has been the case for months, and it can almost seem like some sort of conspiracy between realtors and these meta-agencies to game the market. There are plenty of comps that show prices are WAY above what the 'estimates' show, and yet these professionals are seemingly oblivious. Fear of another 2008? Too much success drumming up bidding wars by underpricing? Whatever the reason, it's pretty infuriating as a buyer because it creates a sort of information asymmetry which makes a major decision really painful.
The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US.
The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.
Even without revealing the highest offer, the offers themselves constitute a silent auction, which is where a lot of the information asymmetry comes from. If I could speak to each of the other people and tell them I had X amount to spend we could all agree to walk away or make offers without going through a bunch of hassle and (for 32 of 33 offerers) heartbreak. The process really highlights to me how broken certain types of 'market' can be when there's a monopoly of information.
toomuchtodo: I am not sure if i would call it "true" value. The true value is what you'd get if you were to sell it again. Maybe at that same day, which sounds to me like the runner-up bid.
> It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.
I think you're completely missing the point of the tool and the last sentence in OP's post... They're getting it wrong on purpose to get signups.
I really like the Zestimate tool (if it's accurate), but it's pretty sleazy for them to use it this way. Most people won't research the market price for every house they see, and as long as the Zestimate is reasonable, they'll assume the sales price is too high.
My neighborhood is the opposite. Zillow will value a house at, say, $650k and it sells for $520k. It's not the condition of the house, either, since it's pretty consistent.
It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.