Less than six months ago Zillow announced that it was making changes to the home value estimator on their website. The “Zestimate” has long been an annoyance of real estate agents who are left trying to explain to their clients why their home isn’t what they thought. Both buyers and sellers have put a lot of faith in the home value estimate obtained from the Zillow website, when traditionally the value has been off by 20% or more.
According to their recent announcement, half of all Zestimates are supposed to to be within 6% of the selling price, and half will be off by more than 6%. We decided to look at a few recent sales to see if the revisions that Zillow has made to their algorithm have improved their home value estimates.
Perhaps the best way to check the accuracy of the home values estimate is to look at recently sold homes and compare the recent sale price to the Zillow Zestimate.
Test Home Value #1 – 4730 Spring Creek Drive, Excelsior, MN
This home sold a few months ago on 9/13/2016 for $550,000. Prior to the house going on the market and selling, the Zestimate value of the house was almost $950,000. Even after the house originally went on the market in the $6xx,xxx range, Zillow did not reduce their Zestimate. How accurate can a home value estimate be if they don’t even take into account the current list price of a house that is on the market? Obviously a house can’t be worth $950,000 if it is sitting on the market for sale in the $600’s. And look at the big price spike back up to the mid $800’s after the house sold for $550,000. Wouldn’t you think it would be a good idea to adjust the Zestimate after the sale?
Sorry Zillow, you guy’s missed this one. My guess is the previous owners of this house were in for a shock when they met with their real estate agent who advised them to list the house for sale in the mid $600’s. If they had tried to sell the house without the help of a real estate agent and priced it based on Zillow’s estimate, they would still be on the market.
Test Home Value #2 – 19208 39th Avenue South, Seatac, WA
This house in Seatac, Washington sold for $869,000 in August. It appears based on the pricing graph that the Zestimate at the time of the sale was pretty close to the actual sale price. In this case, the home value provided by Zillow was within the 6% error rate they are striving to hit. Again though, you have to wonder, why within a month of the house selling for $869,000, they sharply increased the estimated value of the house to over $1,000,000. There was likely an outlier that sold in the area that effected the Zillow algorithm and sharply boosted their estimated value of the house. With the help of a local real estate agent, you would be able to analyze the recent home sales in the area to see if this price increase is justified, or simply bad data.
There really isn’t a substitute for a local real estate agent when you want an accurate home valuation. An agent is able to account for upgrades, layout of the house, bad additions, small differences in location that can positively or negatively impact the value of a home. We applaud Zillow for their effort to improve the Zillow home valuations, however, for now, we still recommend that you contact a local expert to provide you with the most accurate valuation possible.Published in Tags: home valuation home value home value estimate