How accurate is a Zillow Zestimate
I have to admit that Zillow has an incredibly cool and user friendly website, and their "Zestimates" (automated estimate of a home's value )are very popular with consumers. While their technology is cool, how accurate are their Zestimates?
Can an automated system accurately predict a home's value?
A few years ago my parents sold their home. Zillow estimated the value to be in the low $200,000s, yet their home sold quickly (about two weeks) in the mid $300,000 range. Why was Zillow so far off? Because their had been very few sales in their neighborhood in the previous 5-10 years, so Zillow was relying on outdated data.
In neighborhoods like Stapleton, another challenge for automated systems is that you will often find two very different builders across the street from one another. When an automated system compares homes so close together, it must 'assume' that they are comparable (other than square footage). This can result in a devaluation of the custom home that sits across the street from a basic tract home (which in turn shows an inflated value).
In older neighborhoods, an automated system can't look at the condition of each home to value the recently remodeled home over the home with 1970s wallpaper and shag carpeting.
Zillow's measurement of its own accuracy
You may be interested in an often overlooked link on Zillow's own website. Right there on the bottom of their home page, is a link that says, 'Zestimates.' This link takes you to a chart showing Zillow's own measure of their accuracy. Here's the chart as of today (November 1, 2016) with Denver's stats highlighted:
According to their chart, Zillow rates their accuracy in Denver at TWO stars. What exactly does that mean?
Read the rest of the data, and it says that half of the time the 'Zestimate' is within 5% of the actual sale price. That means that half of the time the Zestimate is more than 5% off. Accroding to Zillow, the median home price in Denver is $366,500... and a +/- 5% error would value that home somewhere between $348,175 and $384,825. That's a range of $36,650. Remember, this is Zillow's own analysis of their accuracy, not something provided by a competing website (or a disgruntled real estate agent).
As I said, Zillow is a cool website, and their technology is amazing, but would you consider a $36,000 error in the valuation of your home to be accurate?
Don't get me wrong, homeowners are interested in fast, free home valuations and we have an automated valuation tool on our own website. We review every automated valuation that comes out from our website so that we can talk to the homeowner about its accuracy. These valuations are a great place to start, but they don't replace a professional custom home valuation.
If you're looking for a true valuation of your home's current market value, we'd be happy to provide it to you at no charge. Just fill out the information on this page. We look at recent sales and market conditions, combined with our personal knowledge of the local real estate market. For an even more accurate estimate, we'd be happy to come over and personally look at your home!