Author: Rainy Hake, Executive Vice President, Alain Pinel Realtors
Chances are, regardless of whether you are thinking of selling your home or not, at some point you have looked at your home’s Zestimate – the estimated market value of your home on Zillow.com. You probably have even peeked at a few of your neighbors’ Zestimates too. For some, checking their Zestimate becomes a part of their regular assessment of their net worth – watching it fluctuate with the market. But for how highly people regard them, what do they really know about their accuracy? Did you know that in San Mateo County, a home’s Zestimate is within 10% of the sale price only 38% of the time? Let’s look at why.
Zestimates, now available on over 110 million homes, are home valuations that are computed using an unknown algorithm. According to Zillow, a number of factors go into determining the estimate, including physical attributes (lot size, square footage, number of bedrooms, bathrooms, etc.), prior tax assessments, and prior and current transactions of nearby comparable homes. The dollar price is calculated three times a week and Zillow will even show you a chart comparing a property’s Zestimate history with that of your city and zip code.
However, valuing a home is never as simple as applying a formula. An algorithm never looks at your actual home, so it does not factor in major components that can greatly affect your property’s value. For instance, Zillow’s algorithm does not know the actual condition of your home. While some homes are meticulously cared for, many homes are significantly more worn. And while Zillow knows the geo-location of your home it may not have the ability to give weight to the positive attributes of this location. Some aspects, such as the views or the grade of the lot, are likely to be missed. Have you done significant improvements on your house? It’s likely these are not reflected in the Zillow data either.
This problem is even more pronounced in high-end properties. Some of the most luxury items cannot be appropriately valued without inspection – whether it is the imported tile work, the technologically advanced smart appliances, the hand-crafted finishes, the salt water pool, the state-of-the-art landscaping or the impressive views. These can dramatically alter the value of high-end homes and all are missed by a Zestimate.
So truly, how accurate is a Zestimate? Zillow actually has data about their reliability if you dive into their site. So let us take a look at how accurate Zestimates have historically been in our area:
In all three of these counties, for the majority of homes with Zestimates, they do not get within 10% of the final sales price. For San Mateo and San Francisco counties, they get less than 3 out of 4 within 20% of the final sales price. When looking at luxury homes, the difference between $2 million and $2.4 million is very significant – and yet, this is the error range that Zestimates operate within.
That is why if you really are thinking of selling your home, or just want to know the estimated market value of your home, it is essential to work with a REALTOR®. They will do an extensive comparative market analysis to help determine fair market value. In addition to knowing the local market, keeping on top of recent transactions, and having toured many of latest homes on the market, a REALTOR® can inspect many of the intricacies of your home. So, while it may be fun to feed your curiosity and track your Zestimate – at best, you are only getting a very rough estimate of your home’s worth.
This article recently ran in the October 18th, 2013 Palo Alto Daily News publication Premier Homes, pg 10.
Rainy Hake currently serves as the Executive Vice President of Alain Pinel Realtors where she plays a role in managing the strategic direction of the company, and also oversees the Marketing, Technology, Training and Strategy departments. She has over 15 years of experience in the real estate industry and holds and MBA from the University of Oxford.