Put That Zillow Estimate In Its Proper Place: Don’t Overestimate The Power of Your Zestimate
Why is it so intoxicating to spend hours on Zillow, perusing the dollar amounts attached to that overhead map, lamenting your low Zillow estimate, while cursing your neighbor for having splurged on an emergency generator and inground pool?
There is a certain level of satisfaction that arises from going onto a website and seeing the value of your home in comparison to your neighbors. But it is important not to take those Zillow estimates and Trulia estimates as set in stone.
We all do it. We go from Zillow to Trulia to Redfin, snooping on our neighbors home values and fretting about how those sites value our own homes. But how accurate are they? Let’s take a look at Zillow and find out how true your Zillow estimate might be.
The Accuracy Of A Zillow Estimate
Zillow offers an explanation of how it arrives at an estimated selling point for a house. The language takes pains to make it clear that a Zestimate is not an official appraisal, but “a starting point in appraising a home’s value.”
Basically, the company crunches physical aspects of the home, such as square footage and lot size, along with tax info, prior transactions and local sales data into a proprietary algorithm that spits out an estimated value.
Is that always the most accurate measure of a home’s value? Certainly not. That is why even Zillow itself strongly recommends finding a legit appraiser to assess the value of your home which will be required if and when you are ready to sell or refinance.
And when you are looking at houses online and you see the Zestimate, take it with a grain of salt. The data points that Zillow draws from are always going to be lacking, because it can only consistently obtain publicly available info from tax rolls and other legitimate sources. The homeowners themselves, who could accurately tell Zillow the number of bedrooms or the condition of the structure, are not always willing to share that data with a giant website.
A recent blog post from Real Estate Decoded, written by a moonlighting economist, set out to calculate the typical error in Zillow’s formula. Click here to see his conclusions. Typical error is essentially the same as standard deviation, a common term in statistics. Basically, it means everything is a little bit wrong. Especially calculations involving high-level math and algorithms.
The real upshot of Zillow-snooping is this: it can be a fun way to spend a few hours of house hunting or neighborhood intelligence gathering and it can give you a ballpark idea of how much a house might cost or how a neighborhood is trending. But don’t take those estimates as serious negotiating starting points.
Find yourself a trusted real estate agent to guide your through your house hunt.