How accurate is the Zillow “Zestimate”?

How accurate is the Zillow “Zestimate”?

Have you ever wondered how accurate the Zillow “Zestimate” really is? Many times when I’m working with buyers or sellers I find that they are using Zillow to compare the “Zestimate” with either my opinion of value or with the asking price of a particular home. Perfectly normal: most of my clients are smart people, and this information is free and easily available.

So, just how accurate is the Zillow “Zestimate” anyway? I actually just found out recently how you can determine the accuracy of Zillow in your area. Take a look at this video, prepared by an SRA Appraiser in Birmingham, AL, to learn how:

 

Zillow has gone back in time to compare their historic Zestimate with what the property actually sold for. They say that their “estimated market value” is not an appraisal, but in reality an estimate of market value is an appraisal, but it’s one that cannot be used by a bank —  and one that you may want to think twice about before using to determine a sales price for your home.

Zestimates provide a range in value which can vary widely. The information is based on public and user-submitted data, both of which can vary in accuracy. County records often do not reflect newly finished areas or additions where a building permit was not used. Zillow explains that the further apart the spread from high to low the less accurate their estimate is. Check out the range of accuracy for the Denver area below. Are you comfortable using data that’s only within 10% accuracy a little more than half the time?

Denver zestimate, Winston Downs zestimate

How Accurate is Your Zestimate?

So is it wrong to use Zillow?  No – just recognize Zillow for what it is and don’t expect much more. Without actually looking inside a property, and using research-based methods of adjusting for sales information, you are only going to attain a certain level of accuracy. Another thing is that computers do not recognize similar market areas or differences in location characteristics.  Examples of this include adjustments for schools, traffic, differences in subdivisions and even streets within sub-areas. The other obvious area where inaccuracies can occur is with property condition. Appraisers and brokers are trained to research this information so that adjustments can be made. If a comparable is in inferior (or superior) condition, an adjustment will be made to reflect this.

The bottom line is that an appraisal (or “Broker Price Opinion) made by a person is going to be much more accurate than the value estimate provided by Zillow or other similar website.

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