This question comes up often to real estate professionals. When looking at what a home is worth Zillow offers what they term as a Zestimate which is online, free and easily accessible.
What is a "Zestimate"?
The Zestimate home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value. The Zestimate is calculated from public and user-submitted data, taking into account special features, location and market conditions. It is very easy for anyone to type in an address and be given a number. The problems occur when that number becomes the number that homeowners or buyers look to as the value of a property.
To see how accurate Zillow's Zestimate I decided to compare Zillow's Zestimates to some of our appraisals and see how accurate they were. Due to confidentiality, no addresses are given. Here are my findings:
1. Home: 1,971 Sq Ft 4 Bedrooms, 2 Bathrooms
Zestimate - $181,059
Zestimate was 6.67% lower
2. Home: 1,194 Sq Ft 2 Bedrooms, 1 Bathroom
Zestimate was 32% higher
3. Home: 2,664 Sq Ft 3 Bedrooms, 2.1 Bathrooms
Zestimate was 30% lower
4. Home: 1,136 Sq. Ft. 3 Bedrooms, 2 Bathrooms
Zestimate was 56 % higher
5. Home: 1,658 Sq Ft 3 Bedrooms, 2 Bathrooms
Zestimate was 102 % higher
6. Home: 2,584 Sq Ft 4 Bedrooms, 2.1 Bathrooms
Zestimate was 2 % higher
7. Home: 2,673 Sq Ft. 4 Bedrooms, 2.1 Bathrooms
Zestimate was 8 % lower
8. Home: 1,969 Sq Ft 3 Bedrooms, 2 Bathrooms
Zestimate was 1.9 % higher
9. Home: 795 Sq Ft 1 Bedroom. 1 Bathroom
Zestimate was 93% higher
10. Home: 1,822 Sq Ft 3 Bedrooms, 2 Bathrooms
Zestimate was 5 % higher
Of these ten properties, five of the Zestimates were within 10% of the appraised value and five were more than 10% with one over 100% difference. The Zestimate for these properties is higher than the appraised value for seven of them and lower for three. How can this be?
Zillow estimates a value based on data of the property and comparable sales within a market. The reason that this is not always accurate is because the data the Zestimate is based on is not always accurate. Zillow gets its data from pubic and user-submitted data. The data is not verified and can be wrong. When looking at the Zestimates above those that differed more than 10% had either inaccurate data such as wrong square footage or lot size or the condition of the property made the difference.
Appraisals which are valuations performed by licensed appraisers and Comparative Market Analysis (CMAs) which are performed by professional real estate agents differ from Zestimates. A person who is knowledgeable in the market area and in valuing properties will be able to provide a much more accurate value of a property. The Zestimate does not compares markets as accurately as someone who knows the area. The Zestimate does not consider updates, remodeling or condition of your property or the comparable properties. The Zestimate does not actually measure your home. The Zestimate may not have the data of a room addition that would add square footage or may count a garage conversion which should not be counted as living area. (see How Appraisers Measure a Home).
For an accurate value seek a licensed real estate appraiser for an appraisal or a knowledgeable real estate agent for a CMA. Here is a great post on the difference between an Appraisal and a CMA from appraiser Tom Horn.
Check your Zillow Zestimate data and correct any data that is inaccurate. If you know that the square footage is wrong or the lot size you can correct this data in Zillow. Here is a helpful post from Mortgages.com on how you can change your Zestimate,
Zillow can offer some great information just not where valuation is concerned. Bill Gassett has an informative post on Zillow and the Zestimate with an excellent section How Zillow is Useful.
What is a Zestimate? -Zillow
5 Things Zillow Won't Do to Get Your Zestimate - Tom Horn - Birmingham Appraisal Blog
Are Zillows Home Value Estimates Accurate - Bill Gassett - Maximum Exposure Real Estate
But Zillow says my house is worth a gazillion dollars- Ryan Lundquist- Sacramento Appraisal Blog
Can I Do Anything About My Zillow Estimate?- Mortgages.com
How Accurate is Zillow? - Home Buyer Channel (video)
I hope this was helpful to you in understanding the Zestimate. As always, let us know if you have any questions about appraisals or appraisings. You can contact us at: www.dwslaterco.com.