How Accurate is Zestimate?
Many consumers often use resources on the internet, such as Zillow’s “Zestimate” or other web-based computer algorithm tools in attempting to come up with a market value for a home, prior to listing or buying it. Real estate brokers often hear Zestimate numbers being discussed by clients as though they are “gospel.”
Zillow has been very transparent is disclosing the inaccuracy of their automated valuation model (AVMs) web tool, “Zestimate” …and stating that it was never intended to replace a professional property appraisal or a thorough CMA done by an experienced broker. According to Inman, “it was only intended to be a conversation starter for pricing a home, not the final word on its value.”
Yet as an experienced broker, I continually hear buyers and sellers referring to Zestimate or other AVM numbers as though the site is some kind of “magic 8 ball” of accurate home pricing valuation.
Zillow continues to make efforts to refine the accuracy of Zestimate, but let’s take a closer look at their admitted current error rates and history. According to Zillow, “Zestimate is currently inaccurate by more than 5% of the sales price, 50% of the time.” They also give estimates for the percentages of time that Zestimate is inaccurate by 10% and 20%.
Let’s look at a real-life example. A few years ago, Zillow CEO Spencer Rascoff sold his Seattle area home for $1.05 million, which was 40% less than the Zestimate value of $1.75 million shown on the Zillow property page only a day earlier! Does that sound like an error rate that would be acceptable to you buying or selling a property in Seattle?
While that may be an extreme example of Zestimate’s inaccuracies, it’s fair to ask yourself, “What home valuation error rate would I consider to be acceptable?…, +/- 5%, 10% or 15%?” Your answer would likely be “none of them!” Any of which would, potentially, represent a costly mistake.
Zillow also states that luxury home Zestimates are more likely to be off than others, due to “non-quantifiable facts.” In other words, their error rate increases even more with higher priced, luxury homes. This is Zillow’s way of saying that computer software cannot walk into your home and see the architectural design, floor plan or upgrades that make it unique.
I’m sure you would agree that underpricing or overpricing your home would be a costly mistake. To realize marketing or negotiation success, it’s imperative to establish an accurate valuation of any property.
To be fair, agents can also make mistakes in attempting to quantify CMA valuations, as well. It’s unrealistic to expect an inexperienced agent to replicate the accuracy of an experienced, knowledgeable broker in accessing the complex data and intuition that can be involved in generating an accurate CMA (current market analysis). The person you choose for representation matters.
Look through our list of properties here.