Can you trust Zillow home values?
The Zestimate is a value that Zillow provides for every home listed on its website. It is supposed to be the home's value estimates. Many people rely on the Zestimate when deciding whether or not to buy a home. However, can you really trust the Zestimate? I'll explain how the Zestimate is calculated and discuss whether or not you can trust it.
What is a Zillow Zestimate?
This is a Zillow-exclusive home valuation tool that can provide an online estimate of the value of the majority of homes in the United States. It uses data from both the public and user submissions, and its accuracy is partly determined by how much relevant data is available to the public. Zillow's estimated market is unable to accurately price some homes because, for instance, the number of bedrooms may be unknown.
The Zestimate is calculated using a computer algorithm. This Zestimate algorithm takes into account many different data points about the home, such as its location, size, and amenities. The algorithm also looks at recent sales of similar homes in the area. Based on all of this data, the Zestimate is supposed to be an estimate of the home's value.
However, the Zestimate is not always accurate. Because it is based on an algorithm, it is subject to error. The data points that the algorithm uses may not be accurate, and the recent sales of similar homes may not be representative of the home's true value. Additionally, the Zestimate does not take into account the specific features of the home that may make it more or less valuable. For example, a home with a view of the ocean would be worth more than a similar home without a view.
There are a few terms that must be understood:
- List price/asking price: The homeowner decides this amount with the help of their agent. It might or might not accurately reflect the housing market value.
- Home's estimated value: an estimated amount your home would sell for, given what other, comparative properties have as of late sold.
- Value in the real world: how much individuals are willing to pay for a house.
Zillow Zestimates tend to be more accurate for homes on market than for homes that are not on the market (like yours, perhaps). This is because homes on the market have more information that is publicly available. This information includes the home's listing price, recent sales of similar homes, and other data points that the algorithm uses.
If you are thinking of buying a home, you should not rely solely on the Zestimate. The Zestimate is a good starting point, but you should also look at other factors, such as the asking price, recent sales of similar homes, and the specific features of the home. You should also take into account your personal preferences. Only you can decide how much you are willing to pay for a home.
How accurate is the Zestimate?
The accuracy of the Zestimate depends on many factors, such as the quality and quantity of data that is available, the type of home, and its location. In general, the Zestimate is more accurate for homes that are on the market than for homes that are not on the market.
The median error rate for all homes is 2.5%. This means that half of all homes have a Zestimate that is within 2.5% of their actual sale price, and half have a Zestimate that is more than 2.5% off.
For homes that are on the market, the median error rate is 1.9%. This means that half of all homes on the market have a Zestimate that is within 1.9% of their actual sale price, and half have a Zestimate that is more than 1.9% off.
The median error rate for homes that are not on the market is 7.4%. This means that half of all homes not on the market have a Zestimate that is within 7.4% of their actual sale price, and half have a Zestimate that is more than 7.4% off.
How can I improve the accuracy of my home's Zestimate?
There are a few things you can do to improve the accuracy of your home's Zestimate:
- Make sure that the information that is publicly available about your home is accurate. This includes the home's address, square footage, number of bedrooms and bathrooms, and other data points.
- If your home is on the market, make sure to keep the listing price up to date.
- Make sure that recent sales of similar homes in your area are included in the Zillow database. You can do this by entering the sale information into Zillow yourself, or by asking your real estate agent to do it.
- If you have made any major improvements to your home, be sure to include this information. Major improvements could include a new roof, an addition, or a major renovation.
- If you have any other information that you think would be helpful, you can contact Zillow and let them know.
How is the Zestimate calculated?
The Zestimate is calculated using a proprietary algorithm that takes into account many different data points. Some of these data points include the home's address, square footage, number of bedrooms and bathrooms, recent sales of similar homes, and other information that is publicly available. The algorithm also takes into account certain factors that are not publicly available, such as the quality of the data that is available. The Zestimate is not a perfect predictor of a home's sale price, but it is a good starting point.
To calculate a Zestimate (or come up with a Zestimate price), Zillow uses a sophisticated neural network-based model that uses data from tax assessor and county records as well as direct feeds from hundreds of brokerages and multiple listing services. Additionally, the Zestimate includes:
- Characteristics of the house, such as its size, location, or several bathrooms.
- On-market data, such as the listing price, description, comparable homes in the area, and number of days on market
- Off-market data, such as tax assessments, prior sales, and other publicly available records Market trends, such as seasonal shifts in demand
At the moment, Zillow has data for more than 110 million homes in the United States, and they publish Zestimates for 104 million of them.
What sort of factors impact Zestimate accuracy?
There are several factors that can impact the accuracy of a Zestimate, including:
- The quality and quantity of data that is available. The more data that is available, the more accurate the Zestimate will be.
- The type of home. The Zestimate is more accurate for homes that are on the market than for homes that are not. This is because there is more data available for on-market homes.
- The location of the home. The Zestimate is more accurate for homes in urban areas than for homes in rural areas. This is because there is more data available for urban homes.
- The age of the home. The Zestimate is more accurate for newer homes than for older homes. This is because there is more data available for newer homes.
- Changes in the market. The Zestimate is more accurate for stable markets than for volatile markets. This is because it is easier to predict the sale price of a home in a stable market.
How often is the Zestimate updated?
The Zestimate is updated regularly, typically every few days. But, the frequency of Zillow updates can vary depending on the available amount of data. For example, if there have been recent sales of similar homes in the area, the Zestimate will be updated more frequently.
You can check the date of the last update by going to the Zestimate page for a specific home and looking at the "Last updated" date.
Why the Zestimate can impact your home selling experience?
The Zestimate can impact your home-selling experience in several ways. First, potential buyers may use the Zestimate to determine their initial offer price. Second, if your home is undervalued by the Zestimate, it may take longer to sell. And finally, if your home is overvalued by the Zestimate, you may end up having a selling price that is less than you could have.
Emotions influence how we buy and sell homes, as any experienced real estate professional will tell you. When it comes time to submit a bid, it can be more difficult to make sound financial decisions if you fall in love with a beautiful house that you "have to have. "Similarly, you may struggle to feel confident about the selling process if you believe the Zestimate to be more or less accurate only to have a professional appraisal indicate that your home is worth significantly less.
Confirmation bias also means that people are more likely to believe data that supports their beliefs. The real estate industry is well aware of the fact that people frequently believe their homes are worth more than they are, and confirmation bias is a common problem. Because it matches your perception of your home, even if you are aware that the Zestimate may have overestimated it by thousands of dollars, you may be tempted to treat the Zestimate as "accurate."
In the hopes of getting the Zestimate number, you may even overprice your home and fall into the trap of having fewer interested buyers. This will make your home sit on the market for longer and force you to eventually lower the price.
Should you sell your home to Zillow?
Selling your home to Zillow is not a good idea. While you may be tempted to do so because of the convenience and the seemingly high prices that Zillow offers, you will likely end up selling your home for less than it is worth. There's no fair market value. In addition, selling your home to Zillow means that you will have to move out of your home quickly and may not have time to find a new place to live.
It is better to sell your home through a traditional real estate agent. Real estate agents are experienced in pricing homes correctly and will work with you to get the best price for your home. In addition, real estate agents can help you stage your home and make it look its best for potential buyers.
The Bottom Line
The Zestimate is a helpful tool, but it is not perfect. If you are thinking about selling your home, it is important to get a professional appraisal to determine the correct value of your home. You should also be aware of the potential biases that can impact the Zestimate, such as confirmation bias and the emotional effects of selling a home. Selling your home to Zillow is not a good idea, as you will likely end up selling your home for less than it is worth. It is better to sell your home through a traditional real estate agent.
So, can you trust the Zestimate? It is important to remember that the Zestimate is just an estimate. It is not always accurate, and it does not take into account all of the factors that could affect a home's value. If you are considering buying a home, you should not rely solely on the Zestimate. You should also get a professional appraisal of the home before making an offer.
Homeway is a full-service real estate brokerage in Allentown, PA. Learn more about us here.