Don’t Count on the Zillow Zestimate Price
If you scroll your way to property listings on the internet, dream of buying a home with lots of space, and find something you can’t afford, you are not alone. Finding Zillow has become a strategy for many to deal with the pandemic, although rapidly rising selling prices are likely to exacerbate our anxiety, not diminish it. Nationwide, house prices rose 10.4% in December over the previous year.
It’s easy to fall into Zillow’s automatic home valuations – Zestimates – when you launch your (real or hypothetical) home search. But Zestimates doesn’t often reflect how much a house actually costs or what it will ultimately sell for.
In some markets, such as the highly competitive Phoenix, real estate agents have found that the Zestimate model tends to overvalue properties. On the other hand, Zestimate doesn’t matter if sellers are listing houses at higher prices and buyers are offering much more.
What is Zestimate?
Zestimate is the Zillow Home Assessment Tool. It uses available data from publicly available sources, as well as information about the features of the house, to make a rough estimate of the cost. Zestimates, when available, are included in property listings.
Here’s what Zestimate thinks :
- Characteristics of the house: footage, location, number of bedrooms and bathrooms, etc.
- Data “on the market”: listing price, days on the market, data on comparable properties.
- “OTC” data: tax estimates and previous sales prices.
Zillow acknowledges that its Zestimates are not an official estimate and are subject to inaccuracy. The more data is available for an area and a specific property, the more accurate the Zestimate.
However, the average error rate for homes on the market is 1.9%, which means that only half of all Zestimates are within 2% of the selling price. The average error rate for off-market homes is 7.5%. The error rate is higher in some markets and lower in others.
The bottom line is that Zestimate can be worth thousands or tens of thousands of dollars – and that’s not the same as selling price. This means that you shouldn’t take Zillow’s Zestimate as gospel, whether you buy or sell, but instead, it can be helpful to have a real estate agent who can give you a more specific analysis of your market and determine what is over. – and at a reduced price.