The Zestimate

Have you ever looked at the Zestimate of your home and wonder how Zillow came up with that number? The Zestimate is one of the more well known trends in real estate, but is also one of the most misunderstood calculations of home value.

The first thing homeowners must understand is that the Zestimate is a marketing tool, period. Zillow mines massive amounts of public data and feeds it into its proprietary algorythm, which then spits out an estimate of your home’s market value. Sometimes this estimate can be fairly close to what the actual market might pay for your house, but often it is wildly inaccurate. In fact if you look on their website it has a page dedicated to the accuracy of the Zestimate.

We look at the accuracy of this estimate to help sellers understand the impact of using this number in the process of pricing your home. The accuracy data is divided between houses that are actively listed for sale and sold, and those that are sold off-market. This is where you see the challenges that Zillow has in properly estimating home value.Let’s take a look at the numbers from Zillow and see how they do

The things that stands out the most is the huge discrepancy between accuracy for on-market and off-market properties. Not sure if anyone has noticed this, but once your home goes active with a price, often Zillow will make an adjustment on the Zestimate. As you can see, Zillow needs a local expert to help create a more accurate estimate of your home’s value. Without that, as the numbers above clearly show, they are lost and in the dark about how much your home is really worth. Just keep this in mind as you look at your Zestimate when deciding on a price for you home