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Are Zillow House Values Accurate?

Lots of folks wonder whether Zillow home values are worth looking at. The answer may surprise you.

By Bill GassettPublished 3 years ago 5 min read
Does Zillow Really Give You an Accurate Home Value?

The Accuracy of Zillow House Values

Zillow has been around since 2006, becoming one of the go-to websites for property sales and rentals in the United States and Canada. One of the website's popular features is Zillow home value estimates, or Zestimates, as the site calls them. These Zillow home values use comparable sales data from more than 100 million homes to estimate market value.

If you want to know your home's value out of curiosity or because you want to refinance, it could be a good starting place. But how accurate are Zillow's home values? Frankly, they are no accurate in most instances. In fact, they are a pain in the butt for most real estate agents.

Zillow's home values, unfortunately, make an impression on some people. So much so that they are believed to be the accurate value of a house with some folks.

Real Estate agents routinely have to explain to buyers and sellers why they are not accurate.

Mistakes in the Market Data

Zillow uses algorithms to find home values to - they claim - within 10% of the selling price of a home. However, this calculation can only ever be as accurate as the data it is based on. If there is something slightly wrong, it could throw off the valuation, making it further away than the claimed amount.

Users of the site can fix these mistakes, though they can introduce new ones at so the same time. For this reason, Zillow provides estimated value ranges for each home.

Other information that Zillow uses includes property tax data. This is based on the tax assessor’s report, and this, too, can be inaccurate. There could also be a mistake within the tax database that distorts the valuation. Mistakes can be reported to Zillow if they are noticed by users, however.

Using the assessed value of a home is a surefire way to get an inaccurate home value. There is no correlation at all between an assessed value and the fair market value of a home.

Further, who in the right mind would want to look at a value that is off by ten percent? Not many! Part of what a Realtor does to earn their real estate commission is providing an accurate house value. Can you imagine if it was as easy as looking at Zillow? That is laughable.

The Amount of Sales Data Affects Zillow Home Values

If there haven't been many home sales in your local area, there is less information for the algorithm to use. This will lead to your Zillow home value being less accurate than if you lived in an area with a lot of sales information.

Therefore, Zillow's information will tend to be less accurate for rural areas but closer to reality in high housing turnover locations like cities.

Missing Upgrades in Your Home

If you've made improvements to your home, how will this information find its way into Zillow’s database? It may if the homeowner needs a permit for the upgrade or if the tax assessor adds it to their report, but not all upgrades require permits.

If your home has benefited from a kitchen upgrade, it won't have needed a permit, and it could be a while before it makes it into a tax assessor report. So, compared to an almost identical neighboring house that hasn't had a kitchen upgrade, they are going to be valued the same by Zillow. Though if both properties were sold, the prices they achieved could be very different.

Conversely, if homes in the neighborhood have been upgraded to a higher standard in general, and your home hasn't, the evaluation in Zillow will give you a false sense of what your home is worth.

Market conditions in your local area also play a large role in what your home is worth. If you have done a lot of upgrades, they might not have added that much to the value as you expect. So if you’ve made an upgrade to your home, don't assume you can just add on tens of thousands of dollars to the valuation.

Zillow has no idea you just spent $100,000 on your new gorgeous in-ground heated pool. They have no idea you remodeled your kitchen to the tune of $75,000 with custom cabinets, a Sub-Zero fridge, high-end granite counters, and a wine bar. Are you getting my drift?

You could have dropped a ton of money into your home, and there is no way for Zillow to know or grade the quality.

Conversely, your home could be a disaster inside and need tens of thousands of dollars in upgrades. It might be a candidate to sell as-is. Real Estate agents like to call these kinds of homes fixer-uppers. Zillow doesn't know this.

Improvements to Zillow Home Values

Zillow was the subject of a class-action lawsuit from Chicago homeowners. The claim was that the website had misled home buyers with lower prices for homes. It stated that most of the site's users considered the estimates to be like house appraisals; Zillow denied this claim.

Perhaps as a result of this, Zillow has been working hard to improve its algorithm. They are using a team of data scientists and engineers to make their Zestimates even better. They now use even more information with things like road noise and commutes, adding to the accuracy of the results.

These improvements have led to Zillow now estimating that their error rate is less than 4% across the country. Frankly, I think that is a bunch of hogwash. When it comes to estimating the value of homes there are too many variables involved to get an accurate value.

If Zillow could pinpoint values that easily they would put a lot of appraisers out of business. Sorry folks, that isn't happening.

Final Thoughts on Zillow Home Values

While Zillow provides you with a guide to the value of your home, it shouldn't be considered to be anything more than that, It certainly shouldn't be seen as a replacement for a home appraisal or a market evaluation from competent a real estate agent.

Someone who knows the local market really well, like a Realtor or home appraiser, should be able to offer a better insight into the value of your property. An algorithm can only go so far, and should only be used as a rough guide.

You won't be celebrating and marking your home contingent or under contract if you use the Zillow estimate to price your home.

Hopefully, after reading this, you can better understand why you can't trust Zillow home values to be accurate.


About the Creator

Bill Gassett

One of the top RE/MAX Real Estate Agents in New England. A passionate writer who's work has been featured in many prestigious real estate publications including The National Association of Realtors, RISMedia, Inman News, and Credit Sesame.

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