Why You Shouldn’t Always Believe Your ‘Zestimate’
If you’re a frequent Zillow user, you’ve probably heard of the Zestimate: the free online estimate of your home’s value generated by the real estate company. Sounds convenient, right? You can get your house appraised online without even leaving your chair. You may be tempted to just skip the hassle of hiring an appraiser to get an accurate estimate for your home and use the Zestimate instead. But Emily Heffter, a spokeswoman for Zillow, says that might not be the best strategy.
The Zestimate has come a long way since its creation in 2006, Hefter says. “The main source of information for the Zestimate is public record,” she says. “Think about information that the county tax assessor uses to calculate your property taxes—square footage, bedrooms, and bathrooms.” In 2006, the Zestimate would cross-reference that information with sales records to see the selling prices of similar houses. Twelve years ago, the Zestimate had a 14 percent median error, Heffter says. That means that half of the Zestimates made were within 14 percent of the eventual sale price of the home. Now, in 2018, Hefter says that the Zestimate median error rate is 4.5 percent, so they’ve improved the algorithm over the years.
“We’ve expanded it, so now it uses millions of different computer models and a lot more complex artificial intelligence,” she says. “So we roll in all kinds of different data points. For example, we look at topographical data to try and determine whether you might have a view. We look at air quality data, sometimes street noise data to see if it’s noisy where you live, whether you’re on the waterfront, or if you’re in new construction. There’s tons of different computer models feeding literally millions of data points into this algorithm.” Sounds pretty accurate, right?
But Eileen Oldroyd, owner of Oldroyd realty, says that it’s impossible for a computer algorithm to be 100 percent accurate all the time—but that she’s seen clients accept the Zestimate as the true value of their homes. “Zillow is such a fascinating phenomenon when it comes to how clients react to the price,” Oldroyd says. “Although they know the numbers are typically inaccurate, they rely on them when they want to sell their home.”
Heffter agrees with Olyroyd — the Zestimate is just that, an estimate made by Zillow’s algorithm. “It’s computer generated, and we’ve never been inside of your house, so there are lots of things we can’t know,” Heffter says. “We can’t know how the sun comes into your dining room in the afternoon and we can’t know about your chef’s kitchen.” The good news? You can go into Zillow’s Zestimate and claim your house in order to update the information and get yourself a more accurate Zestimate price. “Sometimes property tax records don’t know about the remodel you did, or they don’t know about the extra bathroom you added,” Hefter says. “So you can go in and make changes to your home facts, and sometimes that can bring the Zestimate to more accurate level.”
Hefter adds that if you live in a neighborhood with a lot of unique homes, it’s going to be harder to get an accurate price, since the Zestimate relies so heavily on comparing recent sales in your neighborhood. But if you live in an area where all the houses are similar, are the same vintage, and are selling frequently, you probably have a very accurate Zestimate, Heffter says.
So it’s not a completely perfect system, but it can get you a ballpark idea for what the value of your home might be. “The great thing about the Zestimate is that it’s free, and you can look it up as a starting point,” Heffter says. “So if you just want to have an idea of whether you could refinance or whether you might want to sell your house or whether you might want to move one neighborhood over or something, you can use it as a starting point.”
Oldroyd agrees, saying that people need to keep things in perspective when using Zillow’s Zestimate — even if it’s a great tool. Oldroyd says that its powerful search engine rivals her own multiple listings service (MLS), a database that real estate agents use to post listings. “[Zillow]’s informative, easy to use, and it’s essentially getting the same information as a local MLS that has been off-limits for decades,” she says. “Yet it’s also a lot like a Facebook Quiz. It gathers your information and randomly busts which character you are in ‘Seinfeld,’ or which Disney princess you are, or what 1980s song you are, or what your favorite color says about you. Although people know the Facebook quiz is a computer-generated result, they still tend to talk about it as if it’s true.”
If you’re serious about selling your house, Heffter says that you shouldn’t solely rely on Zillow’s estimate. “We don’t necessarily recommend you just list your home as the Zestimate because you should work with a local real estate agent who might know something about the neighborhood and who might have a strategy,” Heffter says. “We always recommend you work with a real estate agent to get the most accurate value for your house.” Oldroyd agrees, and suggests using a professional appraiser that is familiar with the area.
The Zestimate’s name says it all—it’s an educated guess made by Zillow, so it’s not always going to be spot-on. Remember to take your Zestimate with a grain of salt, and keep in mind you might have to deal with a little human interaction if you want the most accurate number for your house’s worth.