The Problem with Zillow Zestimates


For many home buyers or sellers who search the Internet looking at home values, the Zestimate has become all too familiar. The question is, should that value be relied on? Zillow uses an automated valuation model (AVM) to determine the fair market value of a property, which takes into account basic characteristics like the number of bedrooms or bathrooms, square footage, and price trends to arrive at an estimated value.  So what’s the problem with that?

  1. Zillow doesn’t know the condition of your home or whether you have upgraded finishes or features. Even if all the homes in your neighborhood are a similar size, the next door neighbor may be hanging on to a 70’s look with shag carpet and wood paneling, while you have upgraded to hardwood floors and hand textured walls. How can an estimate be accurate if these factors aren’t taken into account?
  2. Zillow doesn’t evaluate the location of your home within the neighborhood. Most people would agree that a cul-de-sac location is superior than a home next to a busy street, parking lot or near power lines. That being said, the AVM doesn’t price these homes differently. 
  3. Zillow works on the averaging principle. Zillow uses recent past sales to estimate the value of your home without ever seeing the property. Zillow’s own statement on accuracy of Zestimates shows a median error rate of 7.5%. At $800,000 a 7.5% error could translate to a $60,000 swing higher or lower than the actual value. Yikes!
  4. Zillow doesn’t distinguish between types of sales. A home sold between family members or private parties may have a different price than the same home sold on the open market. Just the same, a short sale or foreclosure that needed TLC will be valued differently by consumers but not by Zillow. The thing is, you know your home should sell for more than the short sale next door, but Zillow doesn’t. 

Bottom line, Zillow is a decent option if you are looking for a quick and rough estimate. In certain metropolitan areas that have large tracts of homes that were built at the same time (i.e. Phoenix) there is a higher level of condense in the Zestimates as the surrounding homes are highly comparable, however in smaller markets like San Luis Obispo County, there is a higher chance of Zillow getting the value wrong. If you are looking for an accurate value of your property, your best option will always be contacting a local REALTOR® who is knowledgeable about the area, can identify marketing challenges and opportunities, and who has a good track record to show. 

* If you want an accurate estimate on the value of your home, you can contact Graham at [email protected] or 805-459-1865 for a complimentary market analysis that considers all relevant variables.

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