The Zestimate is a tool provided by Zillow to help consumers determine the value of their homes. While this sounds great, there are some concerns with the accuracy of Zestimates. It's important to remember that these are just estimates and especially in the state of Idaho can be drastically misleading because Idaho is a "non-disclosure" state where final sales prices are not disclosed to Zillow via MLS. Zillow must attempt to find the information elsewhere i.e public tax records etc. So, before you sell your home with Zillow, here's what you need to know about the accuracy of Zillow Zestimate.
What Is The Zillow Zestimate?
Zillow Zestimate is Zillow's proprietary home valuation tool. This tool utilizes public data and information submitted by users to deliver an online estimate of a home's value. The Zestimate tool is extremely popular with consumers because it enables buyers and sellers to get fast information about a home's potential worth. However, Zestimate has several limitations, and its lack of accuracy can have real-world consequences for buyers and sellers alike. We personally see on a day to day basis wildly in accurate home values.
Before we dive into the accuracy of Zestimates and the factors that affect it, let's first take a look at some important real estate terms that consumers need to know:
- Estimated home value: an estimation of what your home may sell for.
- CMA (Comparative Market Analysis): A report that utilizes recently sold data and compares similar properties in the immediate area to deliver an estimate of a home's value.
- Appraisal: An unbiased professional opinion of a home's value conducted by a licensed real estate appraiser.
- Market value: the amount buyers are willing to pay for a home.
- List price: the requested sales price set by the homeowner.
Zillow's Zestimate is an estimated value, as it is not conducted by a licensed appraiser and is limited to publicly available information. As off-market homes have limited public data available, Zillow's Zestimate may not take into consideration relevant data that affects the value of the home. For example, if a house has more high-end finishings or upgrades, Zillow's pricing algorithm will have a tough time accurately. Another example is when homes on one side of a street have city views and the homes on the other side of the street have no views, Zillow is not aware of this and values you the homes the same
How Accurate is the Zillow Zestimate?
In general, Zillow's Zestimate tends to be much less accurate than a Realtor's estimate. In fact, in some cases, a Zestimate can be thousands and thousands of dollars off. According to Zillow, half of all Zestimates are within 2% accuracy for on-market properties. For off-market properties, the median error rate for Zestimates is as high as 7.5%, and we have seen much greater variances here in Boise, Idaho.
Although the error rate for on-market Zestimates may seem small, it can cost sellers thousands of dollars in missed profit. For example, a home in Boise, ID, with a home value of $535,281, could see a difference as high as $40,146 between the home trues value and Zillow's Zestimate.
Due to Zestimate's heavy reliance on comparable properties and past sales, it fails to consider rapid market changes. This can lead to big losses for homes in a strong seller's market. Put simply, the Zillow Zestimate can provide homeowners with a general idea of their home's value, but it is not a replacement for expert opinion.
What Factors Affect Zillow's Zestimate?
Valuing a home is not as simple as adding two and two. Accurately determining home value requires in-depth local market knowledge and experience. There are several factors that can affect the Zillow Zestimate, including:
Zillow's algorithm heavily relies on general zip code sales data to determine home values. As not every street, or even neighborhood, is the same, this can lead to inaccurate estimates — especially in neighborhoods where the home styles are different or unique.
Improvements or Finishings
If your home has high-end finishings or you've made home improvements, the Zillow Zestimate may not reflect this. This is because the algorithm has difficulty assessing upgrades made to a home that is not publicly available.
Available Comparable Market Sales
Neighborhoods with fewer sales are harder to accurately value than areas with lots of comparable sales. Similarly, the data from communities with a rapid rise in sales and sales prices may be lagging, leading to inaccurate analysis. Idaho is also a non-disclosure state so sellers are not required to disclose their final sales price.
The Zillow Zestimate is determined by an algorithm. The algorithm identifies all similar properties in a zip code, groups them together, and averages the value. Of course, this algorithm isn't able to accurately differentiate between desirable streets with well-kept homes and streets with a mixture of properties.
For example, if your home is located in a well-kept neighborhood that is bordered by an area with unkempt homes, the Zestimate home value may be detrimentally impacted by the less desirable houses. This is why the Zillow Zestimate can offer a great starting point for determining home valuation but shouldn't be used as the sole source of information.
How To Get the Most Accurate Home Value
If you're thinking about selling your home in Boise, ID., it's crucial that you understand its true market value. Here are a few things you can do to find out your homes most accurate home valuation:
- Refer to comparable homes: Comparable home sales of properties in your neighborhood can give you an idea of how much your home might sell for.
- Ask your neighbors: If your neighbors recently sold their home or had it appraised, they might be happy to share their home valuation with you for comparison.
- Consult an experienced local real estate agent: licensed real estate agents understand the local market and can provide an in-depth comparative analysis of your home.
Understanding your home's value better prepares you to buy, sell, refinance, and even negotiate lower property taxes. However, home valuation is more than just comparing square footage and address — everything from your home's condition to its finishings affects its value. Put simply, an algorithm-driven tool such as the Zillow Zestimate is not a substitute for a real estate expert.
Find Out the Value of Your Boise, ID., Home
Whether you are buying or selling a home in Boise, ID, the guidance and expertise of a real estate professional can be worth its weight in gold ! The licensed real estate experts at Templeton Real Estate Group are well-equipped to handle all of your real estate needs. We understand the Boise real estate market and know what it takes to maximize your profit and make your real estate dreams a reality. Contact us today! (208) 473-2203.