All of us are familiar with Zillow.com; perhaps the most popular real estate information web site. In addition to showing active home listings, Zillow shows publically accessible information (such as age, size, taxes and features) on homes not on the market. Included with this information is a “Zestimate” – a home value estimate derived using Zillow’s proprietary valuation model and algorithm, applied to historical data from public records and MLS listings.
Mention “Zestimate” to a real estate agent and you may get a groan of frustration along with an eye roll. Consumers tend to give Zestimates more weight than they deserve when engaging the real estate marketplace, often resulting in unwarranted disappointment or inflated expectations. Depending on property type, location and other factors, Zestimates can be pretty close to actual value or off by as much as 40%; a 10%+ variation is very typical. Most owners already know their home’s value within a 10% range, so is the Zestimate helpful or does it just confuse buyers and sellers?
The Zestimate concept is clever; consumers like it and it no doubt brings traffic to the Zillow web site. However, as a prospective homebuyer or seller, it is important to recognize the limitations of the Zestimate. A Zestimate cannot account for unique property attributes, details and nuances that are not reflected in public records (renovated kitchen, steep driveway, odd floor plan etc., etc., etc.). Nor can it reflect buyer preferences and real-time market conditions. These must be understood and accounted for in order to accurately zestimate a home’s market value. In fairness, Zillow acknowledge on it site the limited usefulness of a Zestimate.