What is a Zestimate?
Zillow is a leading online real estate marketplace in the United States and their estimate of the market value of a property AKA how much a house is worth is called a Zestimate. A Zestimate is intended to give buyers, sellers, and homeowners a starting point for determining the value of a home.
How Are Zestimates Calculated?
As one of the top real estate marketplaces, Zillow has data for over 100 million homes across the country. They have a lot of data and this data along with other information goes into figuring out the Zestimate. The algorithm for calculating Zestimates is continually changing to provide the most accurate information possible. Here are some examples of what could be included to calculate a Zestimate:
- House details (ex: square footage, number of rooms, number of bathrooms, location, etc.)
- Information from MLS and brokerages
- Local county and tax records.
- Sale price of comparable homes in the area
- Market supply and demand
How Accurate Are Zestimates?
Well, that depends. Zestimates are more accurate for houses currently on-market than houses that are off-market. Here are some factors that impact the accuracy of a Zestimate:
Zillow’s Data
The more quality data Zillow has on the value of other houses recently sold in the same area, the more likely the Zestimate will align with the market value of the home.
Error Rates
Zillow provides nationwide median error rates to consider. Currently the Zestimate median error rate for on-market homes is 2.4% and 7.49% for off-market homes.
Home Condition
Zillow does not know the condition of the house. Zestimates are based off of comparable homes in the area, but if a homeowner has put a lot of work into their house since they have purchased it or has not done any renovations that will not be reflected in the cost. From my experience, the Zestimate is assuming houses are somewhat modernized and improved throughout the ownership.
Should I Trust My Zestimate?
The Good
A Zestimate is a great starting point for a ballpark estimate. It can help you determine whether a home’s price is reasonable compared to others in the area.
The Bad
There are limitations to Zestimates. A Zestimate is not a market analysis or appraisal and should not be treated as such. Zillow’s Zestimate is only based on data, where professional appraisers and local real estate agents will have better knowledge of local property values and will be able to give their professional opinions based on your specific property.
The Ugly
Zestimates can sometimes be very misleading. A median error rate of 7.49% means that there are a lot of homes where the Zestimate is way more than 7.49% off. If a home is $500,000, even at 7.49% error that is $37,450 difference. That is a lot of money, so don’t bank on a Zestimate, call a professional.
How to Change Your Zestimate
If you have put a lot of work into your house you may be annoyed that Zillow’s Zestimate does not reflect that. Do not put a lot of weight on the number that Zillow calculates for your Zestimate. If you are getting ready to sell your home you will want to get a trusted local real estate agent.
Get a More Accurate Estimate
Many real estate agents will offer a free comparative market analysis (CMA). If you are looking to buy or sell in Central PA, get connected with Kelli Stouffer to schedule a CMA for your home to provide you with a more accurate estimate based on local factors and in-person analysis.
