In the real estate realm, agents frequently come across “zestimates” from potential property sellers. Discussing Zillow Zestimates has become a common occurrence for us. So, the burning question remains: How reliable are Zestimates for pricing properties? By gaining clarity on this matter, both professionals and consumers can effectively employ Zestimates as a valuable tool. Let’s delve into some points to clarify the accuracy of Zestimates:
- Zillow utilizes its exclusive technology to estimate a property’s market value.
- The median error rate for on-market homes nationwide is 2.4%, while the rate for off-market homes is74%.
- On-market data considers listing price, description, comparable homes in the vicinity, and days on the market.
- Off-market data relies on tax assessments, previous sales, and other publicly available records.
According to a study by the National Community Reinvestment Coalition, Zillow’s Zestimate was within 5% of a home’s actual sale price only about half of the time. The Zestimate algorithm is sophisticated, drawing from public data like property tax records and historical sales data. However, Montana’s non-disclosure status means sold prices are not mandatory for reporting. Moreover, the algorithm cannot factor in certain elements like renovations or additions that may impact value. Zillow reports error rates of 2.35% for on-market homes and 7.74% for off-market properties. Zillow further illustrates this in a chart, depicting the percentage of properties within 5%, 10%, and 20% of the sale price. These statistics reveal that Zestimates generally come close to the market price within 20%, hit within 10% slightly more than half the time, and are within 5% about a third of the time. Approximately 20% of properties deviate by 20% or more, indicating potential financial implications for clients.
| Sales Price | 5% Range | 10% Range | 20% Range |
| $200,000 | ± $10,000 | ± $20,000 | ± $40,000 |
| $500,000 | ± $25,000 | ± $50,000 | ± $100,000 |
| $1,000,000 | ± $50,000 | ± $100,000 | ± $200,000 |
| Zestimate Accuracy | 36/100 properties have a Zestimate within 5%. | 61/100 properties have a Zestimate within 10%. | 82/100 properties have a Zestimate within 20%. |
| *Data compiled from Zillow Zestimates | |||
The company has clarified that the feature serves as a “starting point” for estimating home values and is not meant to substitute the expertise of a professional appraiser. Moreover, Zillow has emphasized its commitment to enhancing the algorithm continuously to enhance the accuracy of the Zestimate. Furthermore, Zillow enables homeowners to input property details themselves, such as square footage, age, and room count, which can enhance the precision of the Zestimate for their specific property. Nevertheless, these self-input options do not equate to a personalized comparative market analysis (CMA) provided by a seasoned real estate agent. Not only do professional real estate agents pull from the local current market, but we assess the condition of the home including repairs and updates that have been done or assessing associated costs that need to be done. We then can look at the target market and then the fair market value. One of the most common misconceptions is that the home is worth its compiled materials and what it would cost to build. However, a property is only worth what a buyer is willing to pay and sold properties reflect that accurately. Real estate agents adjust values based on market interest, buyer response, and allow room for negotiations.
When making a huge life decision, such as deciding whether to buy or sell, it’s okay to step away from the computer and talk with a local expert. Corder and Associates is here for you! We compile CMAs frequently and stay on top of market trends. Reach out if you’re curious about the value of your property.
