Are Zillow Estimates of Home Values Accurate?
Over the past few years, Zillow has become one of the most popular websites for real estate information, with 73 million unique visitors in December 2014. On this site, visitors can search through active listings from around the country, find general information about homes on and off the market, and also look up a home’s current value as determined by Zillow, called a Zestimate®. Given its dominant presence in the real estate market, many home buyers and sellers often don’t want to budge from Zillow’s estimated value when either buying or selling a home.
The Zestimate median error rate varies around the country
But, how accurate is the Zestimate? Per Zillow, nationally the Zestimate has a median error rate of 8%, which means half of the Zestimates in an area are closer than the error percentage and half are farther off. The error rate varies around the country. For example, in Westchester County in New York, the median valuation error rate is 14.1 percent. That means if Zillow values a home at $800,000, the estimate could be off by as much as $112,000. In the Dallas-Ft. Worth area the median error rate is 10.5% while in the Chicagoland area it is 9.1%. In the Washington, DC metro area, the median error rate is 5.4%. More specifically, 46.8% of Zestimates were within 5% of the actual sales price and 71.6% were within 10% of the actual sales price.
However, Zestimates can also be significantly off. One of my radio listeners recently wrote in about their experience buying and selling a home in Michigan. In 2005, this listener purchased a home in Lansing and in 2006 the market value was estimated $230,000. In 2009, after the market crash, this listener sold the home for $120,000 as a short sale, and he considered himself lucky as homes in that area were not moving. However, according to Zillow from 2008-2013, the Zestimate was $225,000 although every home on the block sold within that time period were purchased at less than half of their 2005 values.
A more accurate way to determine a home’s estimated value
Zillow clearly states on their site that the Zestimate, calculated by a propriety formula, is just a starting point in determining a home’s value. A more accurate way to determine a home’s potential value is to request a current market analysis (CMA) from an experienced real estate agent. The CMA takes into account a home’s special features, location, current market conditions, and comparable homes. Specifically, the CMA includes comparable properties in the follow categories:
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Properties that have sold and closed within the last six months
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Active listings – properties that are currently for sale
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Pending sales – listings that have sold, but not yet closed
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Expired or withdrawn listings – properties that did not sell during the listing period.
Home sellers don’t want to set the price of their home too high (which will scare away potential buyers) or too low (which could cost you thousands of dollars). If you are interested using a more accurate measure to determine your home’s value, contact the Eric Stewart Group for a CMA and one of our agents would be happy to assist you!
Sources: Zillow.com and The Washington Post
