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Zillow Home Values Explained

Are you wondering whether Zillow house values are accurate?

One of the questions real estate agents often get from consumers is, "how accurate are Zillow home value estimates."

Home buyers and home sellers need to understand right from the get-go that a Zillow home value is NOT accurate the vast majority of the time.

There are more tools available than ever for the average person interested in buying or selling a home.

The internet provides numerous resources for everything related to real estate – locating properties, viewing, listing, advice on buying and selling, and even pricing calculators.

Zillow is one of the more popular real estate websites that offer many of these tools. Unfortunately, while these tools can certainly prove handy, there are times when using them can give you unreliable information.

One such tool that has proved to be unpredictable repeatedly is a Zillow home value or Zillow Zestimate, as the company likes to call it.

Zillow's Zestimate is used to provide a home's value for any property in the United States. Unfortunately, Zestimate accuracy is all over the map, just like other online estimates.

If you are buying or selling a home, you should never rely on Zillow's estimate to make a value decision. Whether you buy a house or sell a house, you'll want accurate information to make an informed decision.

By the time you're done reading, you'll have an in-depth understanding of why Zillow home values should not be trusted.

The Problem With Zillow Home Value Estimates

Websites like Zillow have great potential to empower buyers and sellers. Where once the world of comparable sales and real estate values was understood only by real estate agents, now everyday buyers and sellers can learn tons of useful information about area properties, including their own.

They no longer have to go to a real estate agent for every little bit of knowledge. The problem is that the estimates – or "Zestimates," as Zillow calls them – are not always accurate. In fact, they can be wildly off, leaving the buyer or seller worse off than before they looked at them.

Zillow may do its best to give you an accurate price of what a home is worth. In the end, though, it is only an automated system that cannot think for itself.

It cannot account for variations in any number of things – changes that substantially alter the price from any sort of "average."

Could the estimations be better programmed to account for this stuff? Definitely, but we are not dealing with the ideal Zillow; we are dealing with it as it is now.

When you are trying to buy or sell, you cannot afford to be off by tens of thousands of dollars in your pricing or your bidding.

So when someone asks a Realtor, "are Zillow home value estimates accurate," you will probably see a look like the one in the picture above.

From my personal experience, looking at Zillow home values in the area of Massachusetts, where I am located, they are typically off anywhere from $20,000 to $50,000 of the actual market value. Probably better than some markets but worse than others.

You have better odds of seeing Bigfoot than an accurate Zillow estimate! Click To Tweet

How Zillow Estimates Value

Zillow uses a proprietary formula to determine the value of a property based on information the website has obtained from public records and information entered by users.

For example, they will use the number of bedrooms, baths, the square feet of living area, and other property data points to figure out property values.

The site knows what the home sold for the last time it was purchased, and it knows this same information for other homes in the surrounding area. Using this along with data entered in by homeowners and user-submitted data – things like features of their particular home – Zillow comes up with a price that a home is worth.

Zillow's proprietary algorithms take all of the available data and use it in the Zillow home value estimator to arrive at their market zestimates.

Unfortunately, Zillow's algorithm cannot consider all the unique characteristics of individual properties that dramatically impact their value.

Assessed Value is a Significant Piece of The Zillow Zestimate

From what many have gathered, one of the value factors that are at the top of Zillow's formula is using a property's assessed value from tax records.

Unfortunately, rarely does assessed home value have a correlation to market value. They are two completely different things. Assessed values are used by towns to collect taxes and, in many cases, trail the actual market value of a home.

Using this piece of information will throw off Zillow's home values right off the bat.

In my experience, I have seen homes sell for over $100,000 more than the assessed value. I have also seen them sell for that much under the value.

Intelligent real estate agents never look at the assessed value when trying to determine market value. If only life were that easy. It would make our jobs as agents so much easier.

Why Zillow Estimates Fail So Often

Why Zillow's Home Values Are Wrong On the surface, Zillow's method seems like it would give a pretty decent ballpark figure for the value of a home. And sometimes, it succeeds.

More often, though, the Zillow home value is off significantly – sometimes by 40% or more.

The most recent selling price of a property is certainly useful information to have and is likely the easiest concrete data that Zillow can obtain.

What a home is sold for is information that buyers and sellers should know about properties. However, it does not indicate what a home is worth now.

The market is changing minute to minute and a sale price that is years if not decades old is no way to estimate the current value of a home.

The recent sale prices of nearby homes are also useful when you are buying or selling. Known as comparable sales, they make up a major factor in how a local real estate agent will price a home.

The problem is, these comparable sales need to be considered for what they actually are – not as indisputable numbers.

Comparable sales can only be viewed as an apples-to-apples scenario in particular situations.

A Zillow Home Value is More Accurate With Cookie-Cutter Homes

If your home is very similar to all the other homes in the neighborhood – such as in a newer housing development of moderately priced homes – and no one has had time to renovate the properties, comparable sales may be easier viewed as apples to apples.

But if you are in an area where the age, size, or features are varied, it quickly becomes an apple to oranges situation: both fruit, but very different kinds of fruit.

The way a Realtor determines real estate market value is off the charts, different than how Zillow's website does it. Local real estate agents or even a professional appraiser understand how one comparable sale relates to the next.

An excellent Realtor is seasoned in comparing drastically different homes in a single neighborhood to get an accurate price on a property. Zillow does not have this kind of ability. This is why it can be off so significantly at times.

Comparable properties are only one tool in measuring a home's value, and Zillow is not so great at using this information as it should be used.

Zillow Tells You The Accuracy of Zestimates is Off

Zillow's website, in fact, does a good job informing consumers that Zestimates may not be accurate on this web page. The problem, however, is that most people never see it. Maybe it would be a good idea for Realtors to share this webpage more?

Another reason the estimates are so off, according to Zillow, is their evaluation method differs from that of a comparative market analysis (CMA) completed by a real estate agent or a home appraisal completed by a local certified appraiser.

Geographically, the data Zillow uses is much broader than just your neighborhood or town. Zillow states that often, they use all the data in a county to calculate property values.

There may be no recent sales in the "neighborhood," but even a few sales in the area allow them to extrapolate changes in the local housing market for a particular area.

However, the data they gather does allow the models to incorporate the neighborhood patterns of recent sales.

Is there any wonder why Zillow home value estimates are so inaccurate? All that keeps coming to mind when thinking about using "county data" is you have got to be kidding me.

The values from one county to the next in my area vary tremendously! Let's throw all the data into one big barrel and call it Zillow value soup. Frankly, that is exactly what the Zillow home value estimator does.

The Zillow Median Error Rate

Zillow states that the median error rate for all U.S. homes is 5 percent. It sounds impressive until you realize what that really means. For all those non-math majors out there, it means that the Zillow property value is within the purchase price only 50 percent of the time.

Frankly, that sucks! Can you imagine wanting to know the value of your home and the actual sale sales price was off by more than 5% over half the time? If you got a professional appraisal of the home, I am sure you would be greatly disappointed if they were off by that much.

If real estate professionals were also giving you inaccurate information to make an informed decision, you would not be pleased. Who would!

Zillow also states that their media error rate for on-market homes is 1.9%, while their off-market homes come in at 7.5%. The correct listing price and corresponding final sales price are critical for buyers and sellers to make the best decisions.

When you sell your house, you want the estimated value to be accurate. Likewise, when buying a house, you want the subject property price range value to be close. Negotiating is awfully tough if you're relying on public data that is not accurate.

The bottom line is the margin of error is far too high to rely on at the end of the day. The real estate industry demands accurate information, and online tools are no way to get it.

The Zillow home value index may have improved since its inception but it is still far from being a good thing to trust. The true value of a home is best calculated by speaking with professionals.

Why So Many Real Estate Agents Hate Zillow

Why Do Real Estate Agents Hate Zillow While hate is a strong word, this is how many real estate agents feel about Zillow. Why is this the case? It is all about one word – credibility.

As a whole, real estate agents have a difficult time being trusted by some people. In some circles, we are only regarded just above car salespeople.

When a home seller sits down to interview an agent on many occasions, a homeowner will already have visited Zillow and taken a look at their "Zestimate of value" for their home.

Along comes a Realtor who presents their comparative market analysis of all the households in the area that have recently sold, gone under contract, and are currently for sale.

The Realtor carefully takes the homeowner through all the local market data until they finally arrive at the suggested list price and probable sale price.

The seller's jaw hits the floor. The local real estate expert has just come to the table with a value that is $50,000 less than what Zillow says the house is worth.

This is where the real estate agent has to go on the defensive because "Mr. & Mrs. I don't trust Realtors" is now looking at you like you have three heads.

How could Zillow be wrong after all, they are a really well-run organization, and we see them advertising on television?

Most sellers don't understand that Zillow estimates the values of over 100 million homes across the country. It would be impossible for them to predict the value of every home in America accurately.

Zillow Doesn't Come in Yours or Comparable Homes

Potential buyers and sellers need to understand that Zillow does not enter properties. They have no idea what you have done to your individual home or in similar homes.

They don't know what, if anything, we do to our houses. You could drop $75,000 renovating your kitchen and baths tomorrow, and Zillow won't know that.

The last time I checked, there wasn't a Zillow peeping tom that looked in everybody's windows. I think everyone can agree, though, that dropping that much money into the kitchen and bath improvements will have a substantial impact on market value.

How could you expect them to come up with an accurate estimate without this information?

Here are more things to ponder:

Zillow doesn't know that the town data card is wrong, and you really only have three bedrooms, not four.
Zillow doesn't know you have a $20,000 structural crack in your foundation that needs repair.
Zillow does not know that your roof is on its last leg and needs replacement.
Zillow does not know you have a major easement running through your backyard that limits its use.
Zillow doesn't know you just added central air conditioning, a sprinkler system, a security system, and $10,000 worth of landscaping.

Is the picture starting to become more clear about the accuracy of Zillow estimates? Zillow's home values can be off by these things and others.

How to Get A Zillow Home Value?

If you have never searched for your Zillow home value, it is fairly easy. You can get Zillow home values by address. Just type your home address into the search bar.

You can also get Zillow home values by zip code as well. When you dig into the site, you'll also see a Zillow home value map showing the estimations of properties in a specific geographical area. So, if you're looking for Zillow house values nearby your property, you can do that.

Other Sites That Provide Online House Value Estimates

Zillow is not the only site that provides a home's value. These other real estate sites do as well:

Redfin: Redfin estimates market value.
RE/MAX: RE/MAX gives a property value.
Realtor.com: See house values provided by the real estate search giant.
Forsalebyowner.com: provides estimates for those selling without a real estate agent.

How Zillow is Useful

How Zillow is Useful You may be thinking after reading the above information that I am not a fan of Zillow. Actually, that is really far from the truth. I love everything about Zillow except for their Zestimates of value.

The other information that Zillow gathers can be really useful when you are buying or selling a home.

When you are ready to buy a home, they have an excellent platform for looking at properties. The information provided is second to none, in my opinion.

There is no doubt that tons of folks love their integrated Bing maps that come with every listing. These are super handy when trying to decipher what is around a particular property.

They have all the information you would expect when buying a home like the square footage, bedroom and bath count, age, lot size, taxes, etc. Where they really excel, however, is their data of the past ownership of the home and what the owner paid.

These statistics are hard to find elsewhere, and Zillow does a marvelous of putting it at a buyer's fingertips.

From a seller's perspective, the site is excellent because the better a property looks online, the greater the chance buyers will pick up the phone to schedule an appointment with their real estate agent.

Zillow Has a Great App

Zillow also has an awesome app for those that have a smartphone. While you are out house hunting, you can quickly and easily pull up information while in front of a home!

This, of course, really comes in handy when you are out by yourself and don't have a real estate agent handy to ask a question you might not otherwise get the answers to right away.

Folks, there is a reason why Zillow is the #1 most visited real estate website on the internet. Even though many Realtors hate them because of their crude estimating model, they provide excellent data that is helpful to both buyers and sellers.

However, you should NEVER think that a Zillow home value is what your property is worth.

Final Thoughts on Zillow Home Values

Several studies demonstrate that it's possible Zillow can be accurate within 80-90% of the value of a home. This means that its estimates can be a good starting point.

However, when you are want to price a home to sell, or you want to know what a home is really worth so you can buy now, its numbers are not accurate enough.

It would be best to have a savvy real estate agent for on-point accuracy than knows the area and is successfully working it right now.

Zillow also shows you how prices are trending, either up or down, in a particular location. This is certainly useful information that can help you decide where you really want to buy and when. It is always good to know where prices appear to be going when making such a large transaction.

Zillow is a useful tool, but it does not provide enough accuracy on home prices to be used exclusively. The site states that its estimates are only a starting point. Keep this in mind when you are getting your own Zestimates.

If you are selling a home for sale by owner and were not planning on meeting with an appraiser or real estate agent to help you determine the accurate market value because you thought the Zillow estimate was good enough, hopefully, this has been an eye-opener.

Keep in mind that the number one reason homes do not sell is an unrealistic asking price. If you price your home incorrectly out of the gate, more than likely, you will end up selling it for less than you would have if priced correctly.

Additional Helpful Zillow Resources

Facts and Figures on Zillow, including Zestimates – see more helpful information on how Zillow home values work. How far off are Zillow Zestimates of value – learn the discrepancy of a Zillow home value vs. actual market value.
Why portals like Zillow won't kill off real estate agents – understand why real estate agents will not become extinct because of anything related to Zillow.

Pricing a home properly is an art and science all rolled into one. It is not accomplished very well by trusting a computer-generated value, whether Zillow or some other online valuation tool.

If you want an accurate value of your home, always consult with a local real estate professional or competent appraiser.

Video: Explanation of Zillow Home Values

The video does a nice job examining Zillow pricing and the accuracy of its Zestimate feature. Take the time to understand why Zillow estimates are not reliable.

The above Real Estate information on are Zillow home value estimates accurate was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 34+ Years.

Thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!

I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.

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Are Zillow Home Values Accurate: Zillow's Estimates Explained (Video)

Article Name

Are Zillow Home Values Accurate: Zillow's Estimates Explained (Video)

Description

Realtors are often asked are Zillow home values accurate. The answer is No! Zestimates are not accurate. See why Zillow values are inaccurate.

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Bill Gassett

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Maximum Real Estate Exposure

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