One of the first questions a homeowner asks when I am preparing to list a home is, “How much do you think I can sell my house for?” Usually before I can answer, they follow up the question with a statement something like, “because I was looking on Zillow and it says…” Now, don’t take this the wrong way, but you can’t believe everything that you see on the internet.
In all seriousness, the internet provides numerous resources for everything related to real estate – locating properties, viewing listings, advice on buying and selling and even pricing calculators. Zillow, through good marketing and good old word of mouth has grown to become a leading real estate website to not only offer these tools, but also to become a virtual crutch to home buyers and sellers alike as they seek instant feedback on their home’s potential value. Unfortunately, although Zillow and other sites have become handy, they can also prove to be very unreliable in the information that they divulge.
What’s the Big Deal?
Zillow and other real estate related websites can totally empower buyers and sellers. For example, where once the world of comparable sales and real estate values was understood only by real estate agents, now everyday buyers and sellers have the ability to learn as much information about area properties including their own at the touch of a button. The problem is, the estimates – or “Zestimates” as termed by Zillow – are often full of inaccuracies. In fact, they can be wildly off, leaving the buyer or seller worse off than before they looked at them. When you are trying to buy or sell, you cannot afford to be off by tens of thousands of dollars in your pricing or your bidding.
Zillow may do its best to give you an accurate price of what a home is worth, but you must realize it is only an automated system that cannot think for itself. It cannot account for variations that deviate from the average. I have found the Zillow values to be off as much as $50,000 – even in the same neighborhood, on the same model of home, by the same builder!
Here are some examples of things that Zillow cannot take into account when estimating the value:
Zillow doesn’t know that the city/county assessor has incorrect information and you really only have 3 bedrooms not 4.
Zillow doesn’t know you have a $20,000 structural crack in your foundation that needs repair.
Zillow doesn’t know that your roof is on its last leg and needs replacement.
Zillow doesn’t know you have a major easement running through your backyard that limits its use.
Zillow doesn’t know you just completed your basement.
How Does Zillow Estimate its Values?
According to the Zestimate info page, “The Zestimate's accuracy depends on location and availability of data in an area. Some counties have deeply detailed information on homes such as number of bedrooms, bathrooms and square footage and others do not. The more data available, the more accurate the Zestimate. Nationally, the Zestimate has a median error rate of 7.9%, which means half of the Zestimates in an area are closer than the error percentage and half are farther off. To improve Zestimate accuracy, we allow homeowners to edit their home facts and then we incorporate this information into our Zestimate calculations. Be aware that in some areas, we might not be able to produce a Zestimate at all, but we do have some basic information on the homes.”
So, in summary, Zillow is correct about half of the time. At least the odds are slightly better than Vegas – right?
What Values Can I Trust on Zillow?
The most recent selling price of a property is certainly useful information to have and is likely the easiest concrete data that Zillow can obtain. This is information that buyers and sellers should know. However, because the information is gathered from past sales, it does not indicate what a home is worth today. The market is changing day-to-day and a sales price that is more than a year old is not a dependable way to estimate the current value of a home.
The recent sales prices of nearby homes are also useful when you are buying or selling. Known as comparable sales, they make up a major factor in how a real estate agent will price a home. The problem is, these comparable sales need to be considered for what they actually are – not as indisputable numbers. Comparable sales must be viewed in very specific situations, for example - If your home is very similar to all the other homes in the neighborhood – such as in a newer housing development of moderately priced homes – and no one has had time to renovate the properties, comparable sales may be viewed as apples to apples. But if you are in an area where the age, size or features are varied, then it quickly becomes an apples to oranges situation. Both fruit, but very different kinds of fruit.
The way a Realtor determines real estate market value is significantly different than how Zillow does it. Local real estate agents and appraisers understand how one comparable sale relates to the next. A good Realtor is seasoned in comparing drastically different homes in a single neighborhood to get an accurate price on a property. Zillow does not have this kind of ability, thus the reason that Zillow values can vary greatly from your local agent’s opinion.
Zillow does disclose that their Zestimates may not be accurate in this web page. The problem however, is that most people never see it. Uh-hum – the reason I am sharing this with you right now.
Zillow also states that it is often difficult to zone into certain areas of cities or counties. Thus, the data Zillow uses can be much broader than just your neighborhood or town. Zillow states that they will often use all the data in a county to calculate a value. So, although there may be no recent sales in the “neighborhood”, even a few sales in the area allow them to extrapolate changes in the local housing market. However, the data they gather does allow the models to incorporate the neighborhood patterns of recent sales. With this knowledge – is there even a question as to why Zillow can come in with a value $20,000 - $50,000 different than your Realtor?
Zillow is a Useful Tool
To be completely honest, I really do like Zillow – other than their value estimates. When you are ready to buy a home, Zillow has an excellent platform for looking at properties. They have all the information you would expect when buying a home such as: square footage, bedroom and bath count, age, lot size, taxes, etc. Where they really excel however is their data of the past ownership of the home and what the owner paid. This is information that is hard to find elsewhere and Zillow does a marvelous job of putting it at a buyer’s finger tips.
From a sellers perspective the site is excellent because the better a property looks online the greater chance a buyer will be picking up the phone to schedule an appointment with their real estate agent.
Zillow also has an awesome app for those that have a smart phone. While you are out house hunting you can quickly and easily pull up information while in front of a home! This of course really comes in handy when you are out by yourself and don’t have a real estate agent handy to ask question you might not otherwise get the answers to right away.
There is a reason why Zillow is the #1 most visited real estate website on the internet – and a reason that Zillow has been trying to partner with agents for the past several years. Despite that fact that many Realtors hate them because of their crude estimating model, they do provide excellent data that is helpful to both buyers and sellers.
Final Thoughts on Zillow
There have been several studies done that demonstrate that it’s possible Zillow can be accurate within 80-90% on the value of a home. This means that its estimates can be a good starting point. However, when you want to price a home to sell or you want to know what a home is really worth so you can make a purchasing decision, its numbers are just not accurate enough. For on-point accuracy, you need a savvy real estate agent than knows the area and is successfully working it right now.
Zillow also shows you the way prices are trending, either up or down, in a particular area. This is certainly useful information that can help you decide where you really want to buy and when. It is always good to know where prices appear to be going when you are making such a large transaction.
Zillow is a useful too, but it does not provide enough accuracy on home prices to be used exclusively. The site states that its estimates are only a starting point. Keep this in mind when you are getting your own Zestimates. If you are selling a home for sale by owner and were not planning on meeting with an appraiser or real estate agent to help you determine the accurate market value because you thought the Zillow estimate was good enough, hopefully this has been an eye opener. Keep in mind that the number one reason why homes do not sell is because of an unrealistic asking price. If you price your home incorrectly out of the gate more than likely you will end up selling it for less than you would have if priced correctly.
Ultimately, I am more than willing to help you to research the value of your home for buying, selling, or just planning for your future. Please reach out to me at any time at (801) 885-2558 or by email at brandonrwood19@gmail.com.
Additional Helpful Zillow Resources
Facts and Figures on Zillow including Zestimates via Wikipedia.
How far off are Zillow Zestimates of value by The Washington Post.
Why portals like Zillow won’t kill off real estate agents via Bloomberg Business Week.
Pricing a home properly is an art and science all rolled into one. It is not accomplished very well by trusting a computer generated value whether it is Zillow or some other online valuation tool. If you want an accurate value of your home always consult with a local real estate professional or competent appraiser.