Zestimates: Not As Accurate As You Would Think

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Zillow’s property-value estimates, called Zestimates, are a popular consumer tool for seeing how much homes are worth. Whether you’re curious about how much your home’s value has changed, wondering if your home’s appraised value is high enough to let you refinance or curious about how much your coworker spent on his new house, Zestimates offer information for more than 100 million U.S. homes. But there are several reasons these numbers may not be as accurate as you’d like them to be.

1. Inaccurate Basic Information

Three times a week, Zillow’s unique algorithms update its collection of property values, which are based on both public data and user-submitted data. According to Zillow, “the vast majority of Zestimates are within 10 percent of the selling price of the home.” But Zestimates are only as accurate as the data behind them, so if the number of bedrooms or bathrooms in a home, its square footage or its lot size are inaccurate on Zillow, the Zestimate will be off.

Users can correct these mistakes. However, Zillow cautions that updating a property’s details won’t result in an immediate change in the home’s Zestimate, and sometimes it won’t result in any change at all. Perhaps having a fourth bathroom doesn’t do much for home values in your town, for example.

Along with accepting user-submitted data, Zillow deals with the inaccuracy problem by reporting estimated value ranges for individual properties. The smaller the range, the more reliable the Zestimate is because it means Zillow has more data available on that property. Looking at the high and low end of the range will give you a better sense of a home’s possible worth.

2. Mistakes or Omissions in Sales Prices

Zillow factors the date and price of the last sale into its estimate, and in some areas, these data make up a big part of the figure. Texas is a non-disclosure state. Very simply, when you sell your home the value is not a matter of public record. Zillow and a lot of other sites attempt to provide you a “value.” The fact of the matter is that none of them have access to sold data. Not a single one of them. Only Realtors and Appraisers have access.   If this information is inaccurate, it can throw off the Zestimate. And since comparable sales also affect a home’s Zestimate, a mistake in one home’s sales price record can affect the Zestimates of other homes in the area.

3. Upgrades and Unique Features Unaccounted For

Sometimes a homeowner makes improvements to a property, and Zillow has no way of knowing unless your local property tax assessor knows about them. If you make any upgrades that require permits from the city, that information may be passed along to the property tax authorities and entered into the public record, which is where Zillow could learn about it. If you added a permitted fifth bedroom to your home, for example, and the property tax assessor deemed that the upgrade increases your home’s value, that information would probably eventually find its way into your home’s Zestimate. But if your home has a brand-new designer kitchen that didn’t require any major permits, yet your neighbor’s home, which also has 1,700 square feet, three bedrooms and two bathrooms, has its original 1975 kitchen, Zillow will value both homes similarly even though your home may fetch a higher sale price.

4. Housing Turnover Rate

Zillow simply just can keep up with the pace! The more home sales there are in your area, the more data Zillow has about how much buyers think those homes are worth. This data makes Zestimates more inaccurate. So if you live in a hot market in the Dallas/Fort Worth area, your Zestimate might be more inaccurate than if you live in a rural town where people stay in their homes for decades and sales are rare.

5. Major Changes to the Zillow Algorithm

Zillow updates its algorithm as it comes up with more ways to improve its accuracy. When this happens, Zestimates can change significantly even though nothing has changed about those homes or the real estate market.

The Bottom Line

Zillow isn’t trying to hide the imperfections of its Zestimates from consumers, and you can’t expect perfectly accurate estimates from competing sites, either. Merely use the prices from Zestimates as a broad guideline, and contrast these figures against other sources. A comparable market analysis from a local real estate agent and a professional appraisal of the home are the best ways to learn its likely value.