One of the first places any home owner looks for a ballpark number of their home’s value is an online estimation. There are a couple of major websites that will happily tell you what their computer algorithm thinks their home is worth: Zillow, Trulia, Redfin, Realtor.com, etc. Are they accurate though? Zillow barely trusts their own estimates, so why should you?
Does Zillow Trust Their Own Zestimates?
Zillow has recently started purchasing homes for “market value” minus a large convenience fee. What was instantly on our mind was whether or not the “market value” they would assign to a home they would purchase is the same as their given Zestimate. So far it has not been the case.
Real Estate markets are made up of so many small details it’s almost impossible for computers to dice them up correctly. Maybe if the tax records were absolutely perfect and there was a perfect database of subdivisions and home features this could work – but so far the required data to make this work does not exist. It takes a real human to weed through comparable properties and to take in account comparable sales to come up with a real home value.
Zillow themselves still fall back on a professional human to price out a home they are about to purchase because their confidence in their own algorithm is not super high.
How Accurate Are They Though?
The algorithmic estimates can vary from very accurate to incredibly inaccurate. As mentioned above, if the data is not perfect the estimate will be off.
We at The Bearse Team have seen homes be incredibly OVER priced when positioned close to a higher end neighborhood but was not differentiated from said neighborhood accordingly. Homes can also be under-valued due to miss-associating a particular sale with a different lot.
Looking for errors in the comparable sales is only something a human will catch. Maybe one day the database these estimates use will be perfect – but that day is not anytime soon.
The best way to approach using a Zestimate or online estimate is to use it as a ballpark figure. We’ve never seen them be hundreds of thousands off but rarely are they absolutely spot on!