First of all, what is a Zestimate?
A Zestimate is an estimated market value of a home on Zillow.com. We have calculated Zestimates on every house back in history as far as we could get data. Additionally, we let people refine their Zestimate via a tool called My Estimator, where they can factor things not reflected in our data, like a recent kitchen remodel or deck addition. Homeowners can keep this information private, or publish it on the site for others to see.
How is this Zestimate number determined?
Our team of statisticians developed a proprietary algorithm designed to estimate the current value of a home. In short, it starts with data about the physical characteristics - number of bedrooms, baths, sq. footage, lot size- of all the homes in an area, obtained from public records. We then look at the relationship between these physical characteristics and the sale prices of home in that area over time and right now. We use these relationships to estimate the current value of an individual home.
Zillow is constantly working feverishly to fill in data holes and add more information. In the areas where we have data, all of it comes directly from county records. We work with a number of third-party data providers nationwide to help us obtain all the relevant current and historic public data from various government agencies around the country. We then combine that data into our master database, from which we use our proprietary process to derive a home's Zestimate.
How accurate is Zillow?
Zillow is designed as a research tool - a first step to determine a home's value or a starting point when researching a particular home. Ultimately, a home's sale price is determined by the buyer and seller.
Nationwide, our median margin of error when compared against actual sales is 7.2%. Not bad - but even better when you use our My Estimator tool. Also, if you want to see how accurate we are in your local area, you can click on the See our accuracy and coverage in your area link on the home page. For example in the St. Paul, MN area, our median margin of error is 6.5% and 68% of the homes in the area are within 10% of the asking price.
This local chart is a good tool to have in your back pocket when explaining to buyers/sellers why there is a discrepancy between your price and Zillow's. Again, updating the home's facts and letting us know about any improvements with the My Estimator tool can also help bring the two numbers closer together.