Automated Estimates Zestimates
Written by: Andrew Goodman
Q: How does the Zestimate on Zillow work? My agent has suggested that I list my property lower than the Zestimate, which doesn’t make sense to me.
A: I’m glad you asked this question. Many sellers believe the Zestimate is the end all, be all when it comes to pricing a home. However, there are a lot of inaccuracies, which make the Zestimate a good place to start, but not an accurate figure for what your home is actually worth.
Per Zillow, “The Zestimate® home value is Zillow’s estimated market value for an individual home and is calculated for about 100 million homes nationwide. It is a starting point in determining a home’s value and is not an official appraisal.”
An appraisal, which I’ve discussed in a previous column, is a third party’s unbiased opinion of the market value of the home. But I believe the “true market” value of a home is what a buyer is willing to pay for the property.
An appraisal is the value that a lender uses to determine the market value of a home and basis for the buyers’ loan.
“The Zestimate is calculated from public and user submitted data; your real estate agent or appraiser physically inspects the home and takes special features, location, and market conditions into account. We encourage buyers, sellers, and homeowners to supplement Zillow’s information by doing other research…”
Unfortunately, the Zestimate is based only on the data it has at its disposal. If the data to a home is incorrect or missing, the value will be inaccurate. The owner of the property can go into Zillow, claim the property and edit the information the way they like.
There are some things that Zillow cannot take into account when determining the Zestimate, including:
-Updated data about the property that hasn’t been edited on Zillow or public records.
-Updates, renovations, or lack thereof to a home or comparable homes.
-The homes icon or location on the icon map, which could hinder market trend analysis.
If your home has been renovated, Zillow wouldn’t be privileged to that information, causing their formula to calculate an inaccurate value. The same goes for recently sold homes and comparables. If the comparables being used to determine the value were renovated, Zillow wouldn’t necessarily know unless the data was uploaded to their site.
As Zillow has suggested, the real way to price a home is through the use of an appraiser or your Realtor. An appraisal and/or a CMA (comparative market analysis developed by a Realtor) will be able to take recent sales, upgrades, locations and other specifics about the subject property and its comparables into account when determining the true value of the home.
The Zestimate and other automated home pricing tools could be accurate, but you won’t know for sure until you talk to a specialist, an appraiser or a Realtor, who would be able to give you an accurate market value on the property using all of the property’s specifics.