People throughout the United States have begun relying on “Zestimates” as their one and only source for obtaining their home’s current value. Sadly, as pointed out by the mainstream media below, this information can often be drastically inaccurate.
In fact, in the United States, the median error rate is 5%. This can absolutely raise some eyebrows when people enter in their home’s information for an automated home valuation and see the number that spits back at them.
To put this into perspective, the LA Times mentions that in San Francisco, California the median home value is near $1,008,000. With “Zestimates” being inaccurate at a rate of 11.6%, this equates to about $117,000. That's a potential $117,000 that belongs in your pocket rather than out the window. That number alone completely ruins the expectation that computers are able to provide you with the most accurate answer regarding the valuation of your home.
According to the LA Times, Zillow’s very own CEO Spencer Rascoff answered that they're "a good starting point" but that nationwide "Zestimates" have a "median error rate" of about 8%.
What Mainstream Media is saying
Los Angeles Times:
Inaccurate Zillow 'Zestimate' a source of conflict over home prices
Can You Trust Zillow's Home Price Zestimate? In a Word: No.
How accurate is Zillow’s Zestimate? Not very, says one Washington-area agent.
US News Real Estate:
Why Home Value Estimate Tools Aren’t as Accurate as You Think
1. Basic Information Can Be Inaccurate
User inputted data contributes to the "Zestimate." Information such as how many bedrooms, the number of bathrooms, square footage of the home, and the lot size must be accurate!
The more information Zillow already has about your home, the better. If it's a newly constructed property or a home that has just been inputted into Zillow for the first time, be CAREFUL!
Below is an image that a Zestimate user created after immense frustration from the inaccuracy of the very basic facts i.e. Year built, square feet, # bedrooms etc.
Source: Zillow Advice Thread
2. Mistakes or Omissions in Sales Prices or Property Tax Records Can Happen
This is a BIG one. Property tax records are a part of the home valuation process that should never be overlooked. Just like inaccurate basic information, inaccurate date of sale or past sale prices affect the perceived value of your home. See the image below for an example.
Source: Seattle Bubble
3. Upgrades and Unique Features that are Unaccounted for
To keep things simple... Zillow won't know what you don't tell Zillow.
It's highly suggested to REPORT your home improvements or upgrades that you make to the property. Although you may view it as a simple, quick and easy fix, it could, in fact, affect your home's overall value when it comes time to sell your home.
There is a misconception that if you happened to update your kitchen or remodel your interior, that doesn't necessarily equate to $100,000 more in value than what Zillow says. Be mindful that upgrades and additions to the home greatly depend on what other homes in your market are like.
The home below had several updates that were unaccounted for therefore resulting in a 30.10% error.
Source: Homes Realty Group
4. Housing Turnover Rate
The turnover rate for the housing market is a simple one. The hotter the market (the more homes that are selling and the more information Zillow has about the homes in your area) the more accurate the Zestimate will be!
5. Major Changes to the Zillow Algorithm
If you are in the market to sell your home, the Zillow Algorithm is something you should pay close attention to. Any adjustments to this formula can affect the value of your home. However, Zillow doesn't adjust their algorithm very often. According to Investopedia.com, when Zillow's algorithm was adjusted, it brought the National average two points down from last year to a median error of 6%.
If you would like the most accurate value of your home with all the above items taken into consideration as well as my thirteen years of selling luxury real estate and forty-four years living in South Florida, I will give you the best idea of what an actual buyer will be willing to pay for it.
Click below for a no obligation report on your home.