Zillow Zestimate Home Values are “Ball Park” Estimates in Terms of Accuracy
The 21st century has a lot to offer in terms of technology making our lives easier. We have devices powered by magic radio waves that allow us to talk to each other across the world, and can grant us access to any piece of information we desire in just seconds. Google has given us all the power to learn about anything we want, and find whatever we want by typing a few words in the search bar.
But in the world of property management, and even the general sales market, we’re seeing technology actually make things, well, a bit more difficult.
Zillow is a wonderful tool for allowing home owners have their properties listed online, and provides a really easy way for prospective tenants and buyers to search for their next home. But property owners and tenants alike have found themselves asking:
What is a Zestimate on Zillow mean?
How accurate is the Zestimate?
Well, let’s answer the first question. The Zestimate is simply an Automated Valuation Model (AVM) that determines a home’s relative value. It pulls data from various sources that include other homes similar to the subject property, and the using an algorithm spits out your “Zestimate”.
But the big question is how accurate is a Zillow Estimate (Zestimate)?
The straight answer is…sometimes, well, not really, maybe?
The variation in housing markets, types of properties, the upgrades or lack thereof, and the swiftness of changing markets makes it simply impossible for a computer to know the exact home value. It’s that plain in simple. It lacks the “human touch” if you will.
So why is this new fad of Zillow Zestimates such an issue?
Put yourself in the shoes of a sales agent, or leasing agent. They know their local market inside and out. It’s what they do for a living, and their knowledge of their local market either makes or breaks their career. If they value a home to little, their seller/rental property owner is being taken advantage of, and if they value it too high, it’s going to sit leading to longer vacancies.
These real estate professionals are now experiencing something they’ve never dealt with before. Suddenly, their client is the professional, not them.
See, the dynamic has dramatically changed. Phone calls used to be like this:
“Hello leasing agent, my property address is 123 easy st, it’s pretty average inside, carpeted bedrooms, needs fresh paint. What do you think it’s worth?”
Now, sigh, it’s turned to this:
“Hello leasing agent, yeah, well my Zestimate says my property will rent for $1,500, so you need to advertise it as such or I’ll find someone else to do it”.
Cue the leasing agent putting their face in their hands knowing it’ll never rent for that price.
See what’s happening? Zestimates are giving a false sense of knowledge to property owners. We’re in no way saying property owners aren’t knowledgeable, but common sense says the professional who deals with values every day will have a much better understanding of a property’s value than an Zestimate.
And you know what? A lot of times it doesn’t overvalue a property; it can actually undervalue it.
Here’s a recent true story.
We had a client whose Zestimate claimed her property was worth $200,ooo. Little did the computer model know, she had recently gutted the entire interior and added the full works. Granite, travertine, new this, new that. It was beautiful.
The real value?
About $240,000. Imagine if she’d listed her property based on the Zestimate? Yeah, that stinks.
So what’s the moral of the story? Trust your local real estate professional. If you’re uncomfortable with the value they give, simple ask around, get a couple opinions. You’ll see they are all going to be about the same.
However, Zestimates can actually be a pretty helpful tool to help property owners get a general idea for their home’s value. Sometimes, the Zestimate is dead on, but without the help of a real estate professional, you’ll never know just how accurate your Zestimate is!