062. How Accurate Are Zillow’s Zestimates?

Hello everybody and welcome to another episode of The Reside Daily Bite; I’m your host, David Doucette and today, we’re going to talk about Zillow and their Zestimates. Before I jump into that, I just want to let you know, if you like the kind of content that you’re seeing here today, you can head over to www.facebook.com/resideFAN and you can like us over there. I also encourage you to send this link to any of your friends and associates who you think might find this information helpful, especially today’s video. If you have any friends that are thinking of selling their home, this is a very good one to send them because we’re going to be talking about Zillow and their Zestimates.

So let’s jump right into it. We’re on the Zillow homepage. Zillow is one of the most frequented US state websites on the internet, with over 12M visits per month -so they got a lot of activity over there. It’s not an appraisal website and I think sometimes, homeowners can think that it is somehow related to an appraisal or the actual value of their homeā€¦and it’s not. And now, I’m going to show you why, here in a minute. If you scroll to the bottom of their website, you will see “Zestimate Values & Accuracy” and what a Zestimate is, is a Zillow created thing through some formula that they have come up with and that they have developed. Let’s click on that and that’s going to take us to “What’s a Zestimate?”page- Zestimate home valuation is Zillow’s estimated market value. And they say it’s not an appraisal. It’s only Zillow’s estimated value but what I want to point out here is really the lack of accuracy in this for homeowners trying to establish real market value of their home.

Let’s look here…we have, “within 5% accuracy of the sale price; within 10% accuracy of the sale price; and within 20% accuracy of the sale price; and also the median error”. And you can go and look at your metro areas.

Here, we have Los Angeles – only 30% of the homes or 30% of the time will it be accurate within 5% and that might sound pretty good but I’m going to explain why it’s not in a minute. 54% within 10% of sale price; within 80% accurate within 20% of sale price and a median error of 9.0%; again, this might sound like okay within the margin of error but, within 20% of sale price…if your home is say, have a market value of $750,000. 20% of $750,000 is $150,000, so, it could be between $600,000 and $900,000 -that’s a huge window.

But I want to talk about this 5% column because a 30% accuracy…you might think 5% is pretty good. It’s not. And I want to tell you why. In our marketplace here on the Westside of Los Angeles, homes are selling within 1-2% of the list price -that’s right, 1-2%. So, you need to make sure your home is priced at market value if you want it to sell. What often times happen is, realtors and homeowners will establish a list price above market value and what’s going to happen is that, home typically will sit on the market until they have enough price reductions to bring it down to market value and then it will sell. Again, homes are selling on average within 1-2% of list price.

So, if we look at this 5%…it’s only 30% accurate. I, as a homeowner can’t really count on that at all. Really, the only way to know the real market value of your home is to pay an appraiser to appraise your home or have an experienced real estate agent show you comps of what is recently sold in the area -recently sold, that’s what we want to see (typically within the last 3 months). We could go back as far as 6 months but typically, we want to see what sold in the last 3 months to determine market value.

So, if you’re using the Zestimate, just be careful. And if you’re really thinking of selling your home, do not use the Zestimate; contact your realtor to have them do a comparative market analysis. If you have any questions or comments on this one, feel free to email me david@residerealestate.com. That’s going to do it for me today, thank you so much for checking out The Reside Daily Bite.

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One Response to “062. How Accurate Are Zillow’s Zestimates?”

  1. Sara Bonert says:

    Sara from Zillow here. Great job explaining the accuracy chart, we are one of the only Automated Valuation Sites that publish our accuracy numbers. It is intended to only give people a starting point of what a computer thinks the home is worth, based on the data we have. If they are seriously thinking about entering into a real estate transaction, it is HIGHLY ADVISED to seek counsel of a professional. Your point about homes selling 1-2% off list price is stellar reason why homes need to be priced exactly right in the first place, and a professional is crucial to doing this.

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