If you have gone through the process of buying a home or working in the real estate industry, you may have come across a very useful online tool called Zillow Zestimate.
Zestimate is a tool developed by Zillow, an online real estate search engine. With this tool, you can get an estimated value of any property, helping you make informed decisions if you’re looking to buy, sell or refinance a property.
But Is The Zillow Zestimate Accurate? That’s a question we’ll be answering in this blog post.
Before we begin our quest, let us tell you that Zillow openly acknowledges the discrepancies that might exist between the ‘Zestimated’ valuation and the actual market price of a home.
Well, more on it, in the upcoming segments!
Zestimate is a term used to describe an automated home valuation system provided by the popular real estate website Zillow. It’s designed to give users an estimate or approximation of a property’s current market value based on various factors and data points.
Zillow collects information from public records, such as property tax assessments, and combines it with their own algorithms to come up with the Zestimate.
Keep in mind that while it can be a helpful starting point, it’s important to remember that the Zestimate is just an estimate and may not always accurately reflect the actual market value of a property.
Zestimate has a system to calculate a property’s estimated value by analyzing various sources such as Public records, data submitted by users, and MLS listings.
Zestimate consider factors like:
- Home square footage
- Location of the property.
- Number of bathrooms
- Number of bedrooms
- Property features and amenities.
- Sales prices of similar properties in the vicinity.
- Tax assessments and previous sales data.
- Current market trends and seasonal demand
It’s important to remember that Zestimate’s evaluation should not be treated as a home appraisal. An appraisal is conducted by professionals with complete impartiality to determine the fair market value of a property.
According to the Zillow Website, the average error rate across the country for on-market properties is 2.4%. While for off-market properties, the error rate is 7.49%.
The level of accuracy depends on how much data is available for a particular home. So, if there is a piece of missing information about a property, it will impact its accuracy. In order to ensure an accurate zestimate, it’s essential you have as much information as possible about the property.
Why is the median error rate for on-market properties less than for off-market homes? Well, the reason is pretty simple. Homes that are listed for sale are priced by professional real estate agents. Zestimate takes this important factor into account when providing an estimate.
The same goes for off-market houses; Zillow Zestimate tends to have more errors in estimating the value of off-market properties because there is a lack of current and complete information available for them due to being ‘off’ the market.
We discussed how a property, when listed, can alter the Zestimate evaluation. There are some other factors that can influence Zillow’s Zestimate. Let’s have a look at these:
As previously discussed in this article, the accuracy of Zestimates relies on the availability and quality of data sources. Inaccurate or incomplete data can impact the estimation accuracy.
Real estate markets can experience fluctuations and changes over time. Rapidly changing market conditions can make it challenging for Zestimates to keep up with the latest trends and accurately predict property values.
Zestimates use general algorithms that might not account for unique features or improvements of a specific property. Some attributes that add value to a property may not be accounted for in Zestimate.
An example of this can be a professionally built outdoor kitchen and entertainment area with high-end appliances and custom features. The Zestimate algorithm may not fully consider the additional value provided by these unique attributes.
Zestimates primarily rely on publicly available data and information provided by users. If certain details or updates about a house are missing or not accurately reflected in the data, it can impact the estimation accuracy.
Real estate markets can vary significantly between regions. Zestimates might struggle to capture the nuances and intricacies of different local markets, leading to variations in accuracy from one area to another.
Moreover, State-to-state variations may exist in defining what constitutes ‘public data’. In some states, certain information about a property cannot be used commercially, which can make it challenging for Zestimate to determine its value accurately.
Zestimates are generated without physically inspecting the property. Visual cues, conditions, and other factors that can only be assessed through an on-site inspection might not be accounted for, potentially affecting accuracy.
Zestimates are produced using complex algorithms, which may have inherent limitations. The algorithms try to generalize and predict property values based on available data, but they might not always capture the full complexity and uniqueness of individual properties.
Going back to the question, ‘Is the Zillow Zestimate accurate’? Well, the answer is; it depends on the amount of information available about a property. The more information and detail you have, the more accurate the estimate will be. On the flip side, less information usually means less accuracy.
However, you can’t entirely rely on Zestimate’s calculations and never consider it an alternative for a home appraisal. Consider talking to a professional real estate agent for a more accurate evaluation of your property.
Agents are highly skilled professionals with valuable knowledge of the local market, know the sales prices, and are experienced in conducting comprehensive comparative market analyses (CMA).
Last modified: May 12, 2023