Is Zillow Accurate in Determining House Values?

“Location, location, location” is a well-known phrase in the world of real estate. Of course location is very important, and yet additional factors come into play when determining the value of a home. Zillow provides estimated home values called “Zestimates,” but you should definitely consider other sources of information as well for a more accurate determination of home value.

It’s quick and easy to go to Zillow to take a quick look at their “Zestimates” of estimated home values. But really, that should just be one piece of information among a number of more important others. If you’re asking, “Should I Trust Zillow to Determine My House Value?” the answer is “not really!”

Zillow’s Margin for Error – 18-20%

Zillow has been reported to average anywhere from 18 to 20 percent higher or lower in home estimates.

Let’s think about this for a moment. For a $200,000 home, a 20 percent deviation is $40,000. For higher-priced markets like Miami or San Francisco, a $1 million home could see unrealistic estimations varying from $180,000 to $200,000 or more! That’s a huge difference in pricing!

Zillow estimates can discourage potential buyers who might think a home is out of their price range, while giving sellers an unrealistic idea of an appropriate selling price point. These estimated values can be the starting point of disagreements some homeowners are having with their selling agents regarding how to properly price their home.

Simply put: homeowners see the price on Zillow and think that is the real value of their home. And that isn’t necessarily the case.

How Does Zillow Actually Create Estimates?

Zillow calls its proprietary estimating tool a “Zestimate.” Even with all the pricing factors placed into the formula, there is still a high margin of error because Zillow isn’t actually looking at your home.

The proprietary formula looks at market pricing in the area. It factors in the size of a house, the lot and all features of the home, including number of bedrooms, bathrooms, pools and highlighted features. However, even Zillow will say this is only a starting point for a true valuation of your home and shouldn’t be considered an appraisal or true value.

The reason is the information Zillow uses is reliant on accessing public records and user input such as realtor sales. However, Zillow cannot discern if your home is the dilapidated eyesore in the neighborhood, or the completely remodeled and upgraded home everyone is dreaming of! And naturally, this can have a huge impact on the true value of a property and on an appropriate sales price.

Additionally, Zillow doesn’t discern community pockets. These are very common in larger cities where you can have a really hot or popular community just blocks from one that’s less so. This type of subtly is lost on Zillow but can affect sales pricing.

Realtors Really Can Provide a More Accurate Valuation

Any professional realtor will tell you that pricing a home to sell requires a full understanding of the home itself, and the location and current market trends in that area. In fact, most realtors look at Zillow pricing with some skepticism, because it does make pricing and managing realistic client expectations more difficult.

A realtor looks closely and thoughtfully at sales in the pertinent area, and creates a radius based on your community pocket rather than on an entire zip code.  They will then compare your home based on its size, features, and upgrades to homes that were recently sold, and thus appraised, in the prior 3 to 6 months. This range is contingent on how hot the real estate market is in that particular area.

They will then compare this information to existing homes on the market, looking at how your home compares to others that buyers will also be seeing on the market. After all, if yours is a well-kept but not updated home that’s being compared and sold next to a completely remodeled home, you probably won’t be able to get the same price per square foot as the other one brings.

There are other factors that some realtors may use to determine a home value. But the important thing to remember is that a good realtor will provide you with a more true valuation of your home. It’s okay to consider the Zillow Zestimate, but it’s also wise to speak at length with a realtor who knows your particular neighborhood and its recent home sales.


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