How Accurate Is My Zestimate?
Who hasn’t checked out Zillow.com for a Zestimate of their home, a neighbor’s, or even a beach house when on vacation? Most of us are guilty as charged!
It’s easy to see why. Zillow, the real estate website and app, can provide market information directly to the fingertips of every buyer and seller. However, Zestimates – a coined name for its own estimated market value of home – is not as accurate or consistent as you may think.
In the DC metro area, the median “inaccuracy” of a Zestimate is 5% of the actual value (which adds up to tens of thousands of dollars). Perhaps their Zestimate is more of a wild guestimate than anything else.
As a seller or homeowner, you may be excited to see a high Zestimate and be disappointed if a real estate agent sees otherwise. Remember, just because something is on the Internet doesn’t mean it’s accurate. So don’t insist your home should be priced like the Zestimate – you could overprice it and your home sits too long on the market without any interested buyers.
Here are 5 reasons why you should be wary of a Zestimate whether you’re a buyer, seller, or just curious.
1. Zillow calls its estimates a “starting point” when determining a home’s value. What does that even mean? It means even Zillow thinks you need more information before you can truly price a home. It clearly recommends that you get a comparative market analysis (CMA) from a real estate agent, an appraisal from a professional, and actually visit the home if a buyer.
2. Zillow relies on data and information and not its own assessment of a home. Zestimates are calculated by using public and any user-submitted data or corrections. It does not conduct its own physical inspection of a home and doesn’t have local employees checking them out either. It’s not like an actual real estate agent or appraiser has walked through this home. So if there are any inaccuracies in the public information, it can’t be corrected on the spot.
If a home’s upgrade or renovation hasn’t been reported to a local tax assessor, than Zillow won’t even know about it and can’t include it in the Zestimate. It depends on “users” to provide correct or new information but that’s not always done on a home.
3. Zillow doesn’t know the local market or your particular neighborhood. In the metro DC market certain neighborhoods are hot right now but just a few blocks over to another neighborhood, prices start to drop. Guess what? Zillow doesn’t really differentiate neighborhoods as much as you’d expect. It uses data from an area much larger than your neighborhood. Many times Zillow uses sales data from an entire county to extrapolate changes in the housing market. How accurate can that be when you want to price a home in a specific neighborhood?
Plus, Zillow’s system doesn’t take into consideration the condition of other homes on the street, if there is a metro that’s walking distance, or even if the home is on a busy road. That’s why its estimations differ from a CMA, where an agent can incorporate so many other factors when pricing a home.
4. Zillow is a computer system not a person. We’re not knocking computers but sometimes you need that human touch or insight that’s missing from a data-cruncher. Zillow’s calculations are based on an algorithm that can only use quantifiable data and not anything subjective – like the quality or the appeal of a home. It can’t “systematically gather and verify” certain information, such as a lovely flat backyard that’s great for entertaining, new granite countertops in an open concept living space, or if that master suite bedroom addition really rocks.
It only knows the number of bathrooms or bedrooms and nothing descriptive about them. Sure, you want to know how many bedrooms a home has, but what about how roomy they are, the size of the closets, and the amount of light from windows? You know what’s special about your home but not Zillow.
5. Zillow shows its own uncertainty by providing a Value Range consisting of a high estimate to a low estimate. For example, if the Zestimate is $300,000, it could have a Value Range of $260,000 – $340,000. For another $300,000 home, the Value Range could be $285,000 – $320,000. See how the second range is less wide and closer to the Zestimate?
According to Zillow, the wider the range indicates that less data was available for their final calculation. A smaller range between the prices means there was more information to come up with the estimated value. So Zillow is providing Zestimates even if it doesn’t have enough information and provides a Value Range to compensate for this inaccuracy.
As you can see, it can be “fun” to check out Zillow if you’re curious but don’t depend on it when the time comes to price your home. You want a professional who knows your specific neighborhood, has walked through your home and knows how well it will show to buyers. You want a home priced right from the get-go and you can’t depend on a Zestimate to have any input! Let us know if you have any questions.