Examining the Word Zestimate
Every realtor hears the word Zestimate throughout their week. And every realtor cringes. Here are some possible scenarios.
“Why are you suggesting I only list my house for $245,000? Zillow tells me my house is worth $284,000. I think we should list it for at least that much.”
Or from the buyer side…
“Why would I pay $140,000 for this house when Zillow says it’s only worth $128,000?”
First things first. Zillow openly says they have a median error rate of 4.5%. That means half the homes on Zillow are within 4.5% of their accurate value, and half are off by more than 4.5% (some dramatically so). Zillow is very transparent about the accuracy of their Zestimates in different markets. Here is the chart they use.
This rating is tied to the Median Error in an area. The ratings are as follows:
- = Best Zestimate
- = Good Zestimate
- = Fair Zestimate
- = Tax assessor’s value, or unable to compute Zestimate accuracy
Kansas City has a one star! Meaning Zestimates mean almost nothing in our market! So I would love to end this blog right here and try to make everyone understand that they should dismiss Zestimates, but I feel it’s important to know what a Zestimate even is.
While Zillow is transparent in their accuracy (or lack there of) Zillow does not reveal much about their methods, and seems to be about as complicated as how Facebook determines their algorithm. Zillow does say that the value is calculated three times a week based on “millions of public and user-submitted data points.” As a homeowner you can log into Zillow and be verified of the owner of your home and submit changes. So if you added on a half bath and that is not showing on Zillow, you will definitely want to log in and submit that change.
Zillow uses fancy algorithms and data to project the homes value. Here is what they do NOT do.
- Zillow workers do not come and walk through your home. They do not see how well maintained (or not maintained) your home is. They do not know that you just put in a brand new air conditioning unit and replaced all the carpet in the home. They do not know how immaculate you upkeep your home.
- Zillow workers will not know about your high end fixtures and upgrades. Zillow doesn’t care if you switched out all your cabinets to custom built ins, and used marble finishes. They don’t care you retiled your shower and added an additional shower head. And on the other end, they won’t know if you took the cheap way out when you decided to replace the carpet your dog ruined.
- Zillow workers do not verify the square footage on your home. Most likely they are using square footage based on tax records, which can be very outdated. Did you recently finish your basement? It is unlikely that the additional square footage is being used for your Zestimate.
- And most importantly…. Zillow workers DO NOT live in your market. They know nothing about Kansas City, the neighborhoods, the value of living down the street from certain areas and businesses. They just cannot put a value on things they do not know.
Zillow is a resource, and in some markets the Zestimate can be a good starting point. However, please find a real estate agent that you trust and ask them to do a comparative market analysis and come and actually walk through your home to determine the value of your home. If you are a buyer, let your realtor tell you if a home is overpriced. Trust your realtor. Trust the appraiser. They are actual humans, not a computer algorithm, who live, work and breathe both real estate and Kansas City.