Whether you're looking to buy or sell a home, major real estate sites like Zillow make it seem easy to get a home value estimate. The information is listed prominently when you look up any address or use their search tools, but housing markets are in constant change and there are many variables that factor into a home's true value. For example, if a home has not been sold in many years and major renovations or additions have been made since then, they may not be reflected in the estimate because that information wouldn't be in the public record.
The Problem with Zillow Home Value Estimates
Sites like Zillow have great potential to empower buyers and sellers. Where once the world of comparable sales and real estate values was understood only by real estate agents, now everyday buyers and sellers can learn tons of useful information about area properties, including their own. They no longer have to go to a real estate agent for every little bit of knowledge. The problem is the estimates – or “Zestimates,” as Zillow calls them – are not always accurate. In fact, they can be wildly off, leaving the buyer or seller worse off than before they looked at them.
Zillow may do its best to give you an accurate price of what a home is worth. In the end, though, it is only an automated system that cannot think for itself. It cannot account for variations in any number of things – changes that substantially alter the price from any sort of “average.”
Could the estimations be better programmed to account for this stuff? Definitely. But we are not dealing with the ideal Zillow; we are dealing with it as it is now. When you are trying to buy or sell, you cannot afford to be off by tens of thousands of dollars in your pricing or your bidding.
Why Zillow Estimates Fail So Often
On the surface, Zillow’s method seems like it would give a pretty decent ballpark figure for the value of a home. And sometimes, it succeeds. More often though, the Zillow home value is off significantly – sometimes by 40% or more.
The most recent selling price of a property is certainly useful information to have and is likely the easiest concrete data that Zillow can obtain. What a home sold for is information that buyers and sellers should know about properties.
However, it does not indicate what a home is worth now.
The market is changing minute to minute and a sale price that is years if not decades old is no way to estimate the current value of a home.
The recent sale prices of nearby homes are also useful when you are buying or selling. Known as comparable sales, they make up a major factor in how a real estate agent will price a home. The problem is, these comparable sales need to be considered for what they actually are – not as indisputable numbers. Comparable sales can only be viewed as an apples to apples scenario in very specific situations. If your home is very similar to all the other homes in the neighborhood – such as in a newer housing development of moderately priced homes – and no one has had time to renovate the properties, comparable sales may be viewed as apples to apples. But if you are in an area where the age, size, or features are varied, it quickly becomes an apple to oranges situation: both fruit, but very different kinds of fruit.
The way a Realtor determines real estate market value is off the charts different than how Zillow does it. Local real estate agents or even an appraiser understand how one comparable sale relates to the next. An excellent Realtor is seasoned in comparing drastically different homes in a single neighborhood to get an accurate price on a property. Zillow does not have this kind of ability. This is why it can be off so significantly at times.
Why So Many Real Estate Agents "Hate" Zillow
While hate is a strong word, this is how many real estate agents feel about Zillow. Why is this the case? It is all about one word – credibility.
As a whole, real estate agents have a difficult time as it is being trusted by some people. When a home seller sits down to interview an agent on many occasions, a homeowner will already have visited Zillow and taken a look at their “Zestimate of value” for their home.
Along comes a Realtor who presents their comparative market analysis of all the households in the area that have recently sold, gone under contract, and are currently for sale. The Realtor carefully takes the homeowner through all the data until they finally arrive at the suggested list price and probable sale price. The seller’s jaw hits the floor.
The local real estate expert has just come to the table with a value that is $50,000 less than what Zillow says the home is worth.
This is where the real estate agent has to go on the defensive because “Mr. & Mrs. I don’t trust Realtors” is now looking at you like have three heads.
Most sellers don’t understand that Zillow estimates the values of over 100 million homes across the country. It would be impossible for them to predict the value of every home in America accurately. They don’t know what, if anything, we do to our homes. You could drop $75,000 renovating your kitchen and baths tomorrow, and Zillow won’t know that.
Here are more things to ponder:
Zillow doesn’t know that the town data card is wrong, and you really only have three bedrooms, not four.
Zillow doesn’t know you have a $20,000 structural crack in your foundation that needs repair.
Zillow does not know that your roof is on its last leg and needs replacement.
Zillow does not know you have a major easement running through your backyard that limits its use.
Zillow doesn’t know you just added central air conditioning, a sprinkler system, a security system, and $10,000 worth of landscaping.
How Zillow is Useful
You may be thinking after reading the above information that I am not a fan of Zillow. Actually that is really far from the truth. I love everything about Zillow except for their Zestimates of value.
The other information that Zillow gathers can be really useful when you are buying or selling a home.
When you are ready to buy a home, they have an excellent platform for looking at properties. The information provided is second to none, in my opinion. They have all the information you would expect when buying a home like the square footage, bedroom and bath count, age, lot size, taxes, etc.
Where they really excel, however, is their data of the past ownership of the home and what the owner paid. These statistics are hard to find elsewhere, and Zillow does a marvelous of putting it at a buyer’s fingertips. From a seller’s perspective, the site is excellent because the better a property looks online, the greater chance a buyer will be picking up the phone to schedule an appointment with their real estate agent.
Zillow also has an awesome app for those that have a smartphone. While you are out house hunting, you can quickly and easily pull up information while in front of a home!
This, of course, really comes in handy when you are out by yourself and don’t have a real estate agent handy to ask a question you might not otherwise get the answers to right away.
Folks, there is a reason why Zillow is the #1 most visited real estate website on the internet. Despite the fact that many Realtors hate them because of their crude estimating model, they provide excellent data that is helpful to both buyers and sellers.
However, you should NEVER think that a Zillow home value is what your property is worth. Zillow is a useful tool, but it does not provide enough accuracy on home prices to be used exclusively. The site states that its estimates are only a starting point. Keep this in mind when you are getting your own Zestimates.
Keep in mind that the number one reason homes do not sell is an unrealistic asking price. If you price your home incorrectly out of the gate, more than likely, you will end up selling it for less than you would have if priced correctly.
Pricing a home properly is an art and science all rolled into one. It is not accomplished very well by trusting a computer-generated value, whether it is Zillow or some other online valuation tool.
If you want an accurate value of your home, always consult with a local real estate professional or competent appraiser.