As Zillow.com has increased it’s presence in online real estate, so has the perception that the “Zestimates™” or home price estimates they present on properties are reasonably accurate. In many cases, they aren’t even close.
More and more, I hear home sellers or potential buyers reference the Zestimate™ shown on Zillow’s web site as if it should be a reliable guide to the actual value of properties. Zillow lists some statistics on their website that should serve as a warning. According to their Zestimate™ Accuracy Table updated on May 31, 2016, in the San Francisco area, their Zestimates™ were only within 10% of the actual sales price 60.6% of the time. Being within 10% of the sales should not be a difficult feat. On a $700,000 property, 10% off is a range of $630,000—$770,000, not exactly a useful guide when looking to buy or sell a home. Almost 40% of the time, the Zestimate™ wasn’t even within 10% of the actual sales price.
The amount that the Zestimate™ can differ from true market value is not consistent either, and it can be considerably higher or lower than the true market value. A couple of recent sales of mine illustrate this point quite clearly. A home I recently listed and sold in Clayton had a Zestimate™ of $880K when we put it on the market. The market value based on the recent sales was clearly not that high, and we listed the property at $750K. It sold after a couple of weeks at $740K. Even after the sale, the Zestimate™ still stated it’s value at $852K. In contrast to that, I recently listed and sold a townhouse in Walnut Creek where the Zestimate™ at the time we listed it was $580K. We listed the property at $668K and sold it just under the asking price. Despite our sale and that of two similar properties in the same complex that were just slightly less, the Zestimate™ after the sale had increased only to $612K a month after the sale.
Another telling instance of the questionable accuracy of Zestimates™ can be seen by looking at townhouse complexes where many of the homes have similar locations and floor plans. At one complex in Walnut Creek I do a lot of work in, the Zesimate™ for the same model in different parts of the complex ranges all the way from $489 to $570K. There’s no apparent rhyme or reason for the difference.
In one humorous instance illustrating the inaccuracy of Zestimates™ , Zillow CEO Spencer Rascoff recently sold his home at 3808 E Madison St. in Seattle for $1,050,000. At the time of the sale, the Zestimate™ shown for his home on the Zillow website was $1,750,000. Even after the sale, the Zestimate™ still showed a value of $1,556,417.
While the “Zestimates™” that Zillow provides can prepare potential buyers moving to an area with a good sense of property prices in a general area, they can also do more harm than good if a home seller or potential buyer cling to them as being an accurate reflection on the value of a particular property.