Zillow Home Values, Are They Accurate?
When buying or selling a home, individuals need to know the property’s value. People can get a Zillow home value or a Trulia home value, which are estimates of property worth to help potential buyers decide. If those estimates are inaccurate, then they are not particularly helpful.
Zillow offers Zestimatesâ€”estimates of a propertyâ€™s value based on surrounding homes, the size of the home, and its amenities. However, its estimates are often incorrect and not just by hundreds of dollars, which would be bad enough, but potentially by thousands of dollars.
How Do Zillowâ€™s Estimates Work?
Zillow collects publicly available information from county records, tax assessors, real estate listings, and data submitted by users. They also use square footage, number of rooms, and location. Market trends affect the result. The company compiles the data to create an estimate.
If homeowners choose, the information about their houses can be updated to better reflect the actual value. Reporting home updates to tax assessors will also affect the Zestimate by updating the data used. Even then, Zillow cannot know about kitchen updates and similar projects that increase value.
However, the fact remains that Zillowâ€™s system is automated and prone to be inaccurate. It cannot factor in the realities of the property, including condition and neighborhood.
Zillow uses the assessed value as one of the main factors, and that value is known to have wildly different numbers than the actual market value. The assessed value has so little correlation to market value that most real estate brokerages ignore it when pricing homes.
Even the price of the most recent sale, while helpful, is not necessarily accurate for the property value. Houses are sold short or otherwise sold at not market value in many situations, which results in an inaccurate value. If the property was last sold several years prior, the market likely changed significantly.
How Does a Real Estate Agent Estimate a Home Value?
Most agents use a more hands-on approach to estimating the home value. Many begin by looking at the overhead view available on software like Google Maps, giving them an accurate idea of location concerning commercial properties, neighbors, streets and highways, and nearby homes.
The map can also show landscaping and position, but the agent knows Google photos are often outdated. Real estate agents will visit the home to verify the condition and check that the satellite images are valid. They will evaluate, inspect, and visually compare the property to similar houses in the area.
The method used by real estate agents results in a better estimate than Zillow home value estimates.
How Does a Home Appraiser Estimate the Value?
Lenders require a property to be appraised before they are willing to underwrite a loan. The buyer usually pays for this service, which a licensed, state-certified home appraiser provides. The appraiser looks through the house and compares the home to a checklist that determines value.
Appraisers do not inspect the house, so some issues that could affect the market value may be missed in an appraisal. The written report usually includes photos and how the property compares to similar properties, along with data from the housing market.
How Accurate is a Zestimate?
Zillow does not claim to be 100% accurate, and that is good because they are not. For homes that are currently on the market, their margin of error is less than for homes that are off the market. It is more accurate for neighborhoods that are very similar within a radius of six blocks.
Zillow relies on software to create estimates. The software cannot calculate nuances and feelings of potential homeowners, so it can only consider factors of data. The human factor is integral in getting an accurate value estimate.
The median error rate is about five percent, but since that is the median, that means that its values are close to accurate around half the time. It is hard to make an informed decision when the information is not right.
Zillowâ€™s website states that homes on the market have a nationwide median error rate of 1.9%, and homes off the market have an error rate nationwide of 6.9%. While it sounds low, the result is that the Zestimates are not correct and could be too high or too low.
Comparing Home Values with Actual Sales
Examples from the Phoenix area show the vast difference between some of the values.
- A 655 square foot unit with one bedroom and one bathroom sold for $220,000. The Zestimate was $185,100 (range $176,000-$194,000). Even the upper number in the range is 12% off. If the buyer had gone by the Zestimate, the seller would have lost at least $26,000 on the deal.
- A two-bedroom, two-bathroom, 1,335-square-foot unit sold for $454,500. The Zestimate was $465,000 (range $442,000-$488,000). While the sale price was within the range, it was near the lower end. If the seller was expecting the Zestimate, he or she was surely disappointed by the $10,500 missing from the final price.
- A Scottsdale home with four bedrooms and two bathrooms in 1,763 square feet sold for $930,000. The Zestimate was $664,000 (range $584,000-$750,000). The selling price was a whopping 19% above the highest number in the Zestimate range. Imagine selling for the Zestimate and losing over $180,000.
- A unit with one bedroom and one bathroom, 579 square feet, sold for $159,900.The Zestimate was $145,100 (range $138,000-$152,000). The seller might have lost over $7,900 by following Zillowâ€™s estimate.
What is My Home Worth?
It is not a difficult task to find the Zillow home values for personal homes, but since these values are known to be largely inaccurate, the best idea is to speak to an expert in the field, such as those at Emery Lane Homes.
Our experience will assist in determining the actual market price of property, whether you are buying or selling. We care about making sure you have the information needed to get the best deal possible on your home.