The internet provides a wealth of information for home sellers and buyers today, including what Zillow calls ‘Zestimates’ or estimated home values. Are Zillow home estimates accurate? Should you rely on them when bidding on a home or pricing your home to sell?
Keep reading to learn about Zillow’s accuracy.
What is Zillow?
First, let’s look at Zillow and how it works. Zillow is a realtor’s marketing website. Zillow sells advertising space to realtors – that’s how they make money. Zillow isn’t run by a group of appraisers or even real estate agents – it’s run by businessmen.
Zillow comes up with its home values based on a variety of data collected. Some of it is fact, but some are also opinion. The same is true for an actual appraisal done by a real estate appraiser, though. Real estate appraisers use the sales prices of other homes in the area that sold recently, but they also impart their opinion on the subject property itself.
Right on Zillow’s website, they state the accuracy rates. The median error floats around 2% for most markets and in most cases, Zillow was within at least 20% of the actual sales price of the home. However, Zillow is only within 5% of the actual sales price around 80% – 85% of the time.
Zillow uses information gathered from public records as well as data provided by individuals. This is where the inaccuracies lie. Zillow can’t tell what the inside of a home is like or what upgrades a home has. Zillow can only use the information provided in readily available data or information provided by the owners themselves. Since most homes have some variation, the accuracy can be off.
Older areas or areas where homeowners have made significant changes to their homes can make it difficult for Zillow to provide an accurate estimate. New developments, for example, have a better chance of accuracy because the homes are typically very similar and have few improvements made yet. Older areas where there’s been significant time to make changes to the home can make it more difficult as each home will vary.
The Location Issue
Another problem with Zillow’s estimates is the location it uses for comparable sales. A real estate appraiser sticks to homes within a one-mile radius, if possible. This gives the most accurate comparison to the subject property.
Zillow, on the other hand, uses countywide data. Given the fact that many counties are rather large, it may use comparable sales that really aren’t comparable in the realistic world of real estate. Using data from homes that are located much closer to one another would provide a more accurate value.
Should You Use Zillow?
The bigger question now is ‘should you use Zillow when valuing a home?’ It really depends. Yes, you can use Zillow as a resource. The more resources you have, the better your chances of selling for the right price or bidding the right price become.
Rather than relying on one source, use multiple sources. If you are a homebuyer, look at Zillow’s Zestimate as a guide. Are you bidding much more or much less than the Zestimate? If so, you may want to do more research. If you are bidding less, then you may get a good deal, but is that the going rate in the area? Sellers aren’t going to accept your bid if it’s too low. If you are selling and Zillow’s estimate is excessively high, you could sit on your listed home for many months with no potential buyers.
Get a Professional Opinion
Whether you use Zillow or not, you should always have a professional opinion on the value of a home. Your real estate agent can be a wealth of information. If you want extremely accurate information, talk with a real estate appraiser that works in the area. Either way, use the information provided from all sources to come up with your answer.
Zillow can be an accurate way to determine a home’s value, but it shouldn’t be your only source. Using information from multiple sources can help you avoid valuing a home too high or too low, helping you to get the best deal on a home purchase or make the most on the sale of your home.Click to See the Latest Mortgage Rates»