Zestimate is a tool created by the online real estate listings website Zillow that attempts to accurately estimate the value of properties on the site.
The Zestimate tool uses a combination of market trends, MLS data, and location-based factors when determining the suggested price for a home.
However, the Zestimate tool has its faults. The tool may fail to take into account external factors undetected by its proprietary formula. Additionally, users may not report all the unique features of their homes and miss out on higher valuations.
You may be wondering “how accurate is Zestimate” and the various factors it takes into account when valuing properties on Zillow. Keep reading to find out the answer to this question and some actionable tips using Zestimate effectively.
Understanding How Zillow Works
While Zillow is primarily known for its database on properties, there’s plenty of other tools the platform offers. In fact, Zillow announced that they are offering financing for home loans through their platform for qualified borrowers.
Here are the main features of the Zillow platform:
Zillow aggregates property listings from various sources, including real estate agents, brokers, Multiple Listing Services (MLS), and homeowners. These listings include details about homes, apartments, condos, and other types of real estate.
Search and Discovery
Users can visit Zillow to search for properties based on location, price range, number of bedrooms, and much more.
Zillow provides a user-friendly interface that makes it easy for people to explore available properties in their desired area.
When a user selects a property listing, Zillow provides detailed information about the property. This includes photos, property history, tax information, estimated property values (with Zestimate), and much more.
Zillow offers a range of tools to help users in their real estate journey. These tools primarily consist of mortgage calculators, affordability calculators, and a mortgage marketplace where users can get quotes from lenders.
Real Estate Agent Services
Zillow also allows real estate agents and brokers to create profiles and advertise their services on the platform.
Users can contact agents directly through Zillow to inquire about properties or request assistance with buying or selling. You’ll also be able to see the past activity for real estate agents and real customer reviews from past clients.
In addition to buying and selling properties, Zillow provides resources for those looking to rent homes or apartments. Users can search for rental properties, view rental listings, and connect with property managers all through the platform.
Market Data and Trends
Zillow also provides market data and trends, including information how the market is moving, interest rate fluctuations, and real estate market conditions.
This can be useful for buyers and sellers in understanding local market dynamics and how markets change over time.
Zillow offers mobile apps for iOS and Android devices, which allows users to access its services on the go and receive notifications about new listings or changes to existing listings.
What is Zestimate?
As we mentioned, Zestimate is a proprietary formula created by Zillow to estimate the market value for properties on the site. Here’s an overview of what goes into the Zestimate on Zillow:
- Data Collection: Zillow collects a vast amount of data related to real estate like square footage, number of bedrooms and bathrooms, tax assessments, recent sales data, and previous selling history. They also gather data on the local housing market and consider factors like trends in supply and demand.
- Machine Learning Models: Zillow employs complex machine learning models to analyze the data they collect. These models are trained on historical sales and listing data to identify patterns and correlations that affect home values.
- Feature Engineering: Zillow engineers create a set of features or variables used to estimate home values. These features can include the size of the property, age of the home, quality of the local school district, and many others.
- Comparable Sales (Comps): One crucial aspect of the Zestimate is the use of comparable sales, also known as “comps.” Zillow’s algorithms look for recently sold properties in the same or similar neighborhoods with similar characteristics to the subject property. These comparable sales help estimate the value of the home in question.
- Continuous Updates: Zillow’s Zestimate is updated regularly to incorporate new data, market trends, and changes in the local real estate market. This means that the estimated value of a property can fluctuate over time.
- User Feedback: Zillow also takes into account user-generated data and feedback, such as information on recent renovations or improvements made to a property. Users can update facts about their homes on Zillow to provide more accurate information to the Zestimate algorithm.
How Accurate is Zestimate?
The accuracy of Zillow’s Zestimate can vary from property to property and throughout locations in the US and abroad. However, Zillow confirmed that Zestimate’s median error rate for homes on the market is 2.4%, while off-market is 7.49%.
While Zestimates can provide a rough estimate of a property’s value, there are several factors that can affect their accuracy:
Zillow relies on publicly available data, which may not always be up-to-date or accurate. Errors or discrepancies in property records can lead to inaccurate Zestimates that may affect what prospective buyers see when viewing a listing.
Property Unique Features
Zestimates may not account for unique features or conditions of a property that affect its value. This includes recent renovations, home additions, new painting, or upgraded appliances.
For those listing on Zillow, it’s important to document all recent upgrades or unique features that may not be visible on your listing photos or in the listing description.
Real estate markets can fluctuate, and Zestimates may not always reflect the most current market conditions. Rapidly changing markets can make it challenging for Zestimates to keep up, which means their property estimates may be slightly inaccurate.
In some areas, there may be limited data available which makes it more difficult to generate accurate Zestimates. In this case, it would be wise to consult with a trusted real estate agent when buying or selling.
Lack of Physical Inspection
Zestimates are based on data and algorithms, and they do not involve a physical inspection of the property. This can lead to inaccuracies if there are undisclosed issues with the property’s condition.
It’s important to disclose all required defects and property information on your Zillow listing in accordance with your local laws and jurisdiction.
Tips for Using Zestimate Effectively
Whether you’re listing your property or looking to purchase one through Zillow, the Zestimate can be a powerful tool throughout the process.
Buyers will be able to see a rough estimate of what to expect for properties they’re interested in, while sellers can look at similar homes within the area to work with their agent on a fair price to list their home.
Here are some tips for using Zestimate effectively this year:
Use It as a Starting Point
Zestimate is a valuable starting point in your real estate journey. It offers a quick estimate of a property’s value, which can be helpful when you’re casually browsing for homes or considering refinancing options.
However, it’s essential to remember that Zestimate is an automated tool and not a substitute for professional advice or a comprehensive market analysis.
Try to think of the Zestimate as a preliminary data point that can guide your initial assessments but should be complemented with a more in-depth evaluation.
Compare Multiple Estimates
While Zestimate can provide an estimate of a property’s value, it’s smart to cross-reference it with other sources.
Real estate professionals like appraisers and local agents can offer their expert assessments based on local market knowledge and firsthand property inspections.
Additionally, websites like Redfin and Realtor.com also provide property value estimates so you can compare prices from multiple listing sites. This approach helps you gain a more accurate picture of a property’s value and what to expect through the buying and selling process.
Understand Its Limitations
To use Zestimate to its full capability, it’s crucial to recognize its limitations. As you know, Zestimate relies on publicly available data and automated algorithms, which may not consider property-specific details or current market dynamics.
Important parts of the home like interior condition are often left out of the Zestimate equation. Additionally, Zestimate’s accuracy can vary by location, which makes it essential to approach its estimates with skepticism in areas with limited data or high market volatility.
Check for Updates
Zestimate values are not static; they often change over time as Zillow updates its algorithms and incorporates new data. This means it’s a good idea to monitor Zestimate regularly if you’re tracking the value of your home or evaluating properties in a specific area.
Frequent updates can help you stay informed about potential changes in property values which is useful in a dynamic real estate market.
Review Property Details
The accuracy of Zestimate estimates heavily depends on the quality and accuracy of the property details input to the listing.
As a user, you should carefully review and verify the property information listed on Zillow, as any inaccuracies or omissions can impact the estimate’s reliability.
If you’re a homeowner, make sure property details like square footage, number of bedrooms and bathrooms, and recent upgrades are accurately reflected on the platform to receive a more accurate estimate.
As we mentioned, Zillow acknowledges that a Zestimate is just an estimate of the value for properties listed on their site.
The error rate we mentioned above represents the percentage difference between the Zestimate and the actual sale price for a given set of properties within a specific time frame. For some properties, Zestimate’s may be very accurate, while for others, they may be less reliable.
If you’re buying or selling a property and want a more precise valuation, we recommend consulting a professional real estate appraiser who can provide an accurate appraisal based on a physical inspection of the property and a thorough analysis of local market conditions.
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