How many times have you heard someone say “Well the Zestimate on Zillow said my home is worth $$$”? Think your Zestimate is a good estimation of your home's value? Think again... The CEO of Zillow, Spencer Rascoff, recently sold his Seattle home for $1.05 million. His Zestimate value was $1.75 million, or about 40% more than the selling price.
Every day, consumers are turning to Zillow for more information. You might just be curious how much your home’s value has changed through the years, maybe you are looking to see if your value is high enough to refinance, or you just want to know how much your neighbor just sold their house for.
This may be a costly mistake, especially for someone who is considering selling their home. Automated valuation models, like Zestimates, often have large inaccuracies, and can set homeowners up for disappointment when they find out what true market value is. What is "true market value?" True market value is simply how much a buyer is willing to pay for a home. A professional Realtor® who is an expert in your area, can help predict how much a buyer might be willing to pay for your home.
What does this mean back home in NJ? We took a look directly at Zillow's reported Zestimate accuracy. You can find the link at the very bottom of their website. In Atlantic County the median Zestimate error is 11.3%, and Zestmates are within 20% of the sold price only 66.5% of the time. This means the Zestimate Value for half of the homes to sell in Atlantic County was more than 11.3% off. In Cape May County the median Zestimate error is 9% and they're within 20% of the sold price only 78% of the time. More troubling is the Zesimate is only within 5% of the selling price 26% of the time in Atlantic County, and 32.1% of the time in Cape May County.
Up to 3 times a week, Zillow is said to update their platform with the most “up to date information”, which are based on public and user entered information. According to Zillow, “the vast majority of Zestimates are within 10 percent of the selling price of the home.” These estimates are only as accurate as the information that is behind them though. So if, there is a missing bedroom, or a lower square footage that is not being taken in to consideration.
On Zillow's "what is a Zestimate" page they encourage a comparative marketing analysis form a real estate agent as well as a professional appraisal.
As Realtors, one of our most daunting tasks is pricing a home correctly. The market can shift from week to week, neighborhood to neighborhood. The main factors being, the motivation of the parties involved, condition of the home, and those around it.
If you're considering selling your home, or are just curious about the value, a Zestimate statistically is not a true indication of current market value. There is no algorithm that can justify the value of a newly renovated kitchen, or a yard that is poorly maintained.
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