Why Zestimates Are Inaccurate

The Truth About Zestimates by Zillow 

Zestimates are an online tool by Zillow, used by home buyers and real estate agents to estimate the market value of a residential property.  

 

A home’s features are combined using an algorithm and compared to data from recent sales and home values in the neighborhood to produce a Zestimate. As a result, Zestimates are only a rough estimate of what the home is worth, not the actual value. They are not an appraisal, and their accuracy varies. 

 

What is a Zestimate? 

A Zestimate is an online tool from Zillow that estimates how much a house is worth. It takes the current sales price and other market information to try to appraise the home.  

 

Zestimates help home buyers determine if a house is a good fit for their situation. They even give potential buyers and sellers a breakdown of what it expects mortgage and utility payments to be.  

 

Because this Zestimate tool gives roughly calculated information as a quick reference for buyers to make their initial decisions, it is prone to be inaccurate. Here are some of the reasons why.  

 

Zestimates Don’t Account for Condition 

Home values fluctuate based on various factors, including the home’s condition. The public may be familiar with the phrase “it’s only worth what someone will pay for it,” but that only applies to the property’s condition. A Zestimate doesn’t account for the shape of a house, and many buyers assume a home is in good condition just because it has a roof over it. 

 

No Recent Sale Data 

One of the most significant factors in Zestimate’s estimation of home value is the amount it sold for in a previous sale. If a house does not have a recent sale on record, there is practically no updated data on which to base the Zestimate.  

 

While Zestimates by Zillow uses the last sale for the house as a basis for comparison, conditions in the housing market can change quickly, making old data outdated and less valuable.  

 

Zestimates Might Not Include Costly Home Improvements 

Zillow makes Zestimates by comparing a home’s features with data from recent sales and home values in the neighborhood. When creating this algorithm, Zillow assesses the current market to determine what features are associated with a home’s worth. This can lead to misleading results if something has changed in the housing market.  

 

For example, a home’s roof is likely to impact its value significantly, but so do other factors, such as the roof’s age and condition. For example, a homeowner put on a new roof, a $10,000 investment. Does that information get tracked in Zillow right away? Definitely not. Zillow’s algorithm may assess the roof’s age or condition and provide a low Zestimate. This can negatively impact the ability to sell homes for maximum value. 

 

Similar examples might include if a homeowner renovates a kitchen or bathroom, adds a bedroom, finishes basement space, or even paves the driveway.  

 

It’s an Estimate, Not an Appraisal 

Another common misconception about Zestimates is that they are an appraisal. 

 

Zestimates are not an appraisal and should not be used in place of a professional review. It’s important to understand that Zillow only produces Zestimates; an assessment is conducted by a State-licensed appraiser. Zillow only provides Zestimates as a reference point for potential buyers and sellers. 

Get Advice From a Realtor  

Zestimates can be a helpful tool for anyone just starting to look at buying or selling a home. They make researching a house much more efficient so that potential buyers can make quick decisions. However, no matter what stage you are in the home buying process, it is far better to work with a realtor. 

 

Start your home buying or selling process by consulting a realtor. Contact CM Fox Real Estate through our website or call us at 518-861-7030 to set up a consultation.