How Accurate Is Zillow? RE Agents Comment

Here are my thoughts on Zillow:

1. It works for liquid markets

Zillow uses an algorithm to aggregate data of active listings and recent sales, and then applies a standard deviation to the result. I've found that in liquid markets where home sales occur frequently, the Zestimate tends to be accurate within 5% to 10%.

2. It does not work for unique properties

Because Zillow uses an algorithm to calculate its Zestimate, the output is only as good as the input. An acreage won't have nearly as many comps as a starter home surrounded by hundreds of similar properties, so the result will be skewed. For unique properties, I've seen the Zestimate vary by up to 50%. However, Zillow itself discloses that its estimates may vary by up to 50%.

3. When to Use It

While I never advise homeowners to use the Zestimate to price a home, it does give you a decent idea of what your home is worth. However, keep in mind that it'll be most accurate if you live in a suburb or a neighborhood where sales of similar homes occur on a regular basis.

--Andrew Helling, REthority

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Zillow is based on algorithms that populate the value estimate according to bedrooms, sq footage, nearby houses, etc.

The problem then, is when a seller puts up faulty information that doesn’t reflect the actual property, Zillow goes based on user submitted information. Users can correct these mistakes, but they are not always caught or updated.

--Isaiah Ram, Florida Realty Marketplace

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We use Zillow on a daily basis to quickly check out properties before we make offers on them. Zillow can be very very accurate, much of the time for us, and sometimes way off. Zillow is most accurate when there have been many home sales within a small radius of the home in question. The platform basically does what a human would do and pulls numbers and compiles them into A Zestimate.

Where things can go awry is when you have homes that are vastly different in quality. I.e. a home with no upgrades compared to one that is fully decked out. It is in this area that Zillow struggles and it falls on you to take a good look at pictures and do your own due diligence.

--Brittany Hovsepian, The Expert Home Buyers

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As a Realtor w/eXp Realty and a Full-Time Real Estate Investor, is about 95% Accurate, that I find Zestimates accurate. I find that Zestimates are most accurate in more populated areas; areas where there are a lot of comps and similar properties to estimate. I find that their way off, either when there are few comparable for them to pull data from or if the subject property is too different than the properties around it. I've also found that sometimes there are considerably off when trying to differentiate a home that is a manufactured home and the majority of the houses are Stick Built. I just had one similar to that and the value it was giving me was a lot higher than I know the property would support.

--Shea Adair, Sell Raleigh Home Fast

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I have never come across a Zestimate on Zillow that didn't seem overgenerous.

I usually take Zestimates with a grain of salt because my personal price analysis offers more value, however, I certainly do include Zestimates in my listing presentation when I meet with sellers.

The Zestimate is only another price opinion based on Zillow's internal algorithm. Realtor.com also has its own home value price opinion. The algorithms are based on public data collected by the companies.

Zillow appears to be making efforts to improve the accuracy of their Zestimates as they improve their algorithm.

The general opinion among industry professionals is that Zestimates are usually way off the mark and can cause sellers to ego price their homes. Overpricing a home because of a Zestimate is never recommended by seasoned luxury real estate agents.

Pricing homes too high because of Zestimates will limit the listings exposure to qualified buyers. Overpricing your home because of a Zestimate is the worst thing you can do if you're serious about selling your home.

--Marc Anthony, marcanthonyestates.com

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Zillow bases its estimates on trends and percentages in the area. When there is more real estate diversity in the region, the estimates can be significantly off. For instance, there are areas that are experiencing rapid changes with old homes being torn down to build more lavish estates. Averages aren't accurate when you are mixing outdated homes from 50+ years ago with mansions built last week. There are other regions in which some homes are zoned mixed-use or unrestricted. Here you can see businesses run out of traditional houses. This zoning can increase the value of the homes that allow businesses, but it can also decrease the surrounding value of homes that are zoned residential only. There are fewer people that want to live adjacent to a car repair shop, attorney's office, or other business.

--Tiffany Heathman, TopHoustonRealtor.com

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It's a pretty good resource if you just want a ballpark estimate of the current value of your home. But unless lenders stop requiring appraisals and move to a completely automated platform, a Zestimate will never replace the official valuation performed by a licensed appraiser.

Since Zillow controls this metric, the historical Zestimate graph going back up to 10 years is not set in stone and can be modified at will by Zillow as they update their valuation model and incorporate new sales data.

Where are they reasonable accurate (if ever)

The Zestimate is very accurate when evaluating tract housing where all the homes in the neighborhood were built in the same year and follow the same 2-3 floorplans.

The Zestimate is also quite accurate in an area with a lot of sales activity, as this provides a wide range of recent sales comps.

and where are they way off the mark?

The Zestimate doesn't work so well in neighborhoods that have a large variance in the size, age, quality or condition of the of homes built. Many older metropolitan cities differ greatly from one block to the next. An experienced appraiser would take extra care to select the right sales comps, but it is unknown whether the Zestimate model is intelligent enough to account for this nuance.

The Zestimate also doesn't work so well in rural areas where homes are far apart from each other and sales are few and far between, which makes evaluating recent sales comps much more difficult.

--Caleb Liu, House Simply Sold

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Zillow underprices:

Zillow touts that they are within about 10% of home prices. And I have found, that they are not. Zillow uses algorithms. And homes vary too much to use an algorithm as an accurate tool. For instance, a home that recently sold was provided a Zestimate of $388,000. Now this home has a mixed-use zoning. It has been improved as well and it is actually two units instead of one. It would be very difficult to Zestimate, or what I say, guesstimate with reasonable accuracy without seeing it in person and getting the entire picture. In this case, Zillow is off by about $30K.

Zillow overprices:

Now, the other side of this coin is overpricing. As a Realtor, I go to a home to list it. More often than not, I will have a homeowner tell me that Zillow said their house is worth XXX. However, after I do a walk-thru and start my own comparable search to produce a Comparable Report, I find that because the home is in need of updating, that the price that Zillow provided the owner was way off. By almost $50K. But the owners were adamant about the Zestimate. I did not get that listing. But it sat for a long time and had quite a few reductions in the price before it sold over 60 days later.

All-in-all, Zillow is a great way to get a feel for overall neighborhood pricing. But it is important to keep in mind that homes are as different as peoples and for that reason, the personal investigation and report of a Realtor, or a certified appraiser is much more accurate.

--Denise Supplee, SparkRental

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Zillow estimates can be incredibly hit and miss. They can be reasonably accurate when you are looking in a more cookie-cutter neighborhood where all the houses are very similar and there have been quite a few recently sold properties.

Unfortunately, when you have houses that differ from one another, are nearby but in a less desirable area, or the properties need a lot of repairs, the Zillow estimates are often way off the mark.

Zillow estimates are not able to account for many of the variables that can greatly affect the value of a property and that makes it very risky to rely on them when you are making a decision.

--Nick Disney, Sell My San Antonio House

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As a licensed real estate agent since April 2005, Zillow can actually be fairly accurate when using location and price per square foot calculations.

However, Zillow is very rarely accurate when accounting for the condition of the property or whether it's a one level or a multi-level property.

Zillow can and usually does give the same Zestimate to fixer upper as it does to a remodeled property of the same size and location.

In the Phoenix Metro area, only 26,300 active properties & 1.5M off market properties have Zestimates, and Zillow's own data appears to state they can be off by 20% - https://www.zillow.com/zestimate/

So, do I trust Zestimates? NO

Do I think Zestimates are helpful? Yes to Zillow, but not to home buyers, home sellers, and real estate agents

--Paul Welden, CheapPhoenixHomes.com

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In general, Zillow is a convenient tool for providing a quick snapshot of property value, especially in larger cities with a high volume of real estate sales. Its greatest strengths are that it is free, and that it employs the industry best practice of using comparative property sales to establish values (comps). Especially for people who don't have access to a regional Multiple Listing Service, Zillow can be great for benchmarking a property's value.

Zillow's valuations do have limitations, however. Valuation estimates are usually limited to single-family residences (SFRs); anything larger, like a duplex, triplex, or multifamily, generally does not have a Zillow value estimate. Within the realm of SFRs, the greatest limitation is that the comps used to establish the value are not listed - this means that the value you see on the Zillow profile may not factor in the condition of the property, and there is no way to know how the system accounts for variations in square footage, bed/bath count, or construction quality. Depending on the volume of real estate sales activity in the city in which the property is located, this can cause pretty large variations in value. In our experience, Zillow value estimates tend to be higher than broker's price opinions (BPOs) in smaller cities, and lower than BPOs in larger cities.

In short, a Zillow value estimate is no substitute for a valuation from an experienced realtor who understands the local market, or even for a valuation calculated by a regional MLS. However, so long as you understand the limitations of the number you get from Zillow, it can still be useful for painting a general picture of how much a piece of residential property is worth.

--Mark Adams, California Receivership Group

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It's been our experience that Zillow's property value estimations (Zestimates) are within approximately 10% of the property's actual value, plus or minus. Oftentimes, when booking an appointment with a potential seller we always ask how much they think their home is worth and they most often quote the estimate on Zillow. While it's not perfect, those estimates tend to be a reasonably safe exercise in identifying a starting place to set a seller's price expectation prior to our more detailed assessment. I'd just exercise caution thinking that Zillow's quote is concrete, as that can leave many homeowners with a feeling of disappointment, even if their property had appreciated and can sell at a nice listing price. A 10% swing can be either a small amount that's not a huge concern or a notable amount that could be a dealbreaker, all depending on your market location and home prices there.

Where you'll see the most accuracy in Zestimates, traditionally, is with homes that are in cookie-cutter newer subdivisions with lots of the same floorplans and features. This is especially true when sales volume has been high in that subdivision, as Zillow will have plenty of data points to analyze. Zestimates are famously bad at valuing older homes built in custom subdivisions where each home is unique. This is especially true of higher-dollar neighborhoods where home values swing widely based on finishes, location within the neighborhood, views, and other factors that Zillow's algorithms can't assess. Likewise, Zillow also struggles to factor in detriments to home values like a house sitting on a major street or backing up to a power line. Basically, the more your house is exactly like the majority of your neighbors the better Zillow will be at valuing it. The more your house is special like a snowflake, the worse it will be.

One final thing to consider is the trajectory of market pricing. Right now home values are rising very quickly because of the nationwide housing shortage. Zillow tells you where prices were not where they are going. A good agent can tell you where they are going and factor in specifics like the fact that perhaps your home is the only single story for sale in the neighborhood right now. These details can make a big difference in price.

--John Gluch, Gluch Group

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Zillow's estimates are simply an algorithm and an algorithm is only as good as the data you feed into it. If the data are not accurate, complete and consistent, you'll get poor results. That's why Zillow's estimates do well in more uniform, transparent housing markets.

I know Zillow's estimates are pretty good in Phoenix because they have the necessary information and homes are fairly similar. For example, if you know five identical homes on the same block sold for $225 per square foot over the last year, you can be pretty sure the sixth will sell for about $225 per square foot as well.

If you don't know that information or the homes are very different, the algorithm and estimate quality start to break down. For example, if those five homes were all 2,000 square feet and you're trying to value the 5,000 square foot home with a giant pool on the corner, you're introducing a lot more variables and the estimate will be less accurate.

As another example, Texas is a non-disclosure state which means the prices of actual transactions don't have to be disclosed. That makes it almost impossible for Zillow to make accurate estimates there because they don't have much data to work with.

Here in NYC, the estimates are total garbage because even if you step across the street, you're introducing a dozen variables. You have 100 year old buildings next to brand new condos, construction quality / renovations, light, monthly fees, distance to the subway, etc. It's just impossible for Zillow or any other algorithm to accurately value properties here. Maybe way down the road when more data resources are available but this will probably be the last market they figure out.

--James McGrath, Yoreevo

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A Class action lawsuit was filed in 2017 by homeowners claiming lower home values misled buyers and that people were trying to use the Zestimate as an appraisal. Zillow denied the claim saying these only are estimates, not appraisals. Zillow went on in early 2019 to contract data engineers to improve the Zestimate by updating the algorithm and expanding the data collection. Zillow claimed this would drop the error rate by 4%. Zillow has been very transparent about the imperfections and limitations since the Zestimate came out in 2011.

The Zestimate is a starting point to give you around about the value of the property. The numbers that Zestimate gives you depends on a lot of things:

The comparable sales in the area.

Property taxes

Potential upgrades that have been made to the home.

The turnover rate in the area

Tax assessment filings

Commute times

Transportation ratings

Area access to amenities like stores, schools, grocers, parks, entertainment.

Etc.

The nice thing about the Zestimate is that it updates three times a week with public and User submitted data. Zillow gives it's self a tight range for larger housing markets, claiming that the Zestimate is around 2 % of the selling price of the home does not guarantee it will be though. When the data isn't up to date not only will the Zestimate me wrong but it can be significantly wrong.

Having the ability for users to update the property information can be a burden for Zillow since it can cause inaccuracy. Also if public records that are old, lacking, or reported incorrectly it can cause major issues for Zestimate accuracy. This can grow to be a bigger issue. Since Zillow uses comparable data in the area. If one home is poorly or inaccurately documented by any of the data contributors, for any reason it can cause other homes in the area to have an inaccurate Zestimate as well. This problem gets worse the older the home and area are, accurate documents get harder to obtain. Zillow does however provide a value range and the more data that is collected and the more recent the data is the narrower this range will become. Allowing someone to have a better sense of the potential price of the home. Along with the value range, Zillow provides localized error rates in a table on its website.

--Chase Muse, Your Mortgage Muse

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Real-estate search websites like Zillow are built for consumer convenience. They're designed to give viewers a one-stop assessment of a home's most important elements, from lot size, parking, and year built to price and tax history. Not to mention the professional-grade photos often featured with each listing is just fun for folks to look through.

There are innate pros to convenient online real estate websites like Zillows, especially for house hunters.

- Zillow and other listing sites are a modern version of a multiple listing service, only this time they're buyer-facing, making home info way more accessible.

- They make baseline information about for-sale homes open and transparent rather than guarded by brokers and multiple listing services.

- They allow house hunters to shop more broadly across desired neighborhoods and price points, and for sellers to get their homes in front of more eyes. That's a huge plus for everyone.

However, Zillow doesn't always maintain the most up-to-date listings. Plus, how the website aggregates data from outside sources is a bit of a sour topic for some realtors, because it often uses MLS service data realtors themselves compile but doesn't update or really credit those agents for the work.

- Zillow outright states home prices and taxes are estimates.

- The price you see listed on Zillow is not always indicative of the actual current listed price. It could be higher or lower, and potential buyers shouldn't assume what they've seen online is even a workabout offer.

- Zillow itself has also run into problems with keeping up listings for homes that actually sold weeks ago or aren't even on the market to begin with. This doesn't happen often, but enough for home buyers, sellers, and agents alike to question the site's vigilance about data updates and deletion rates.

- Zillow's algorithms pull from multiple databases to create each property listing. I've heard agents and brokers often grumble that these websites pull info from their own MSL networks or systems but use it to make money for their online brand, or to send buyer leads to other agents.

Overall, Zillow is a mixed bag of mostly positive features. It favors curious home shoppers so long as they're aware the website isn't always being updated in the most time-sensitive manner and the listing prices and selling data are just ballpark estimates best used for reference.

--Shane Dutka, Review Home Warranties

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