Zillow is the leading real estate website, with a total of 44.19 million visits, excluding those on mobile devices (source). Zillow is rich with information about property value estimates (Zestimates), sales histories, neighborhoods, and schools. Before visiting the site to get an idea of your or another’s property value, be sure to keep a few things in mind:
- Zestimates are a starting point when determining a home’s value. The Zestimate is calculated from public and user-submitted data as well as a variety of MLS’s. It takes into account special features, location and market conditions. This means that Zestimates do not know if the kitchen has been renovated or the carpets are stained; these things can definitely affect the value of the property both positively and negatively.
- The accuracy of the Zestimate depends on the the area. The accuracy ratings include Best, Good, Fair, and Unable to Compute. Zillow reports thier accuracy for each county in California here. Zestimates in Santa Cruz are considered “fair” with only 50.5% of Zestimates within 5% of homes’ true value and 74.1% within 10% of their value. With a median home price of around $800,000 in the Santa Cruz area, a 10% error can cost you $80,000.
- Monterey and Santa Clara estimates are considered “Best” and “Good” respectively.
- Why is it important not to overvalue the home when you list it? Because the longer the home sits on the market, the more likely buyers will wonder what’s wrong with it. Additionally, if you do get an offer for a home that is priced above market value, a bank is unlikely to loan more money than the home is worth (as determined by an appraisal).
If you are selling, the best way to ensure that you have a good understanding of your property’s value is to speak to a local, professional agent who studies the local market regularly. She will perform an in depth analysis of your home, helping you to understand what factors increase and decrease its estimated value. You will gain peace of mind knowing that you have made an intelligent and well informed decision about your listing price. You can read more about pricing your home competitively in today’s market here.
If you are buying, you will have to make an offer that is both competitive and frugal. Having an in-depth understanding of a given property’s estimated value will put you in the position to do just this.
What About Other Home Valuation Estimates?
As of writing (August 20th, 2019) Redfin is more accurate than Zillow. According to their internal metrics, 84.84% of homes will be within 5% of the predicted sales price, and 96.80% of homes will be within 10% of the estimate. You can see Redfin price prediction accuracy rate by county in California here.
Keep in mind that Redfin uses listing data in their estimates. As explained in this article, since the list price influences the ultimate sale price, it’s not surprising that Redfin’s able to get very close to the ultimate sale price for listed homes. However, this means that these metrics are not an independent estimate of a home’s value based on independent data.
Additionally, Redfin’s chief growth officer in charge of data science, Adam Wiener stated “The biggest hurdle that home-value estimates are still facing is that they can’t see inside the home. They don’t know if you’ve upgraded your kitchen, they don’t know if you have a particularly great design aesthetic and you’ve really made your place look awesome. That is going to show up in the home price when you go to sell it, and so there are certainly cases where the estimate has gotten it wrong, and the best place to get the most accurate home value is from a local experienced real estate agent.”
Similar to Zestimates, we suggest that you take Redfin estimates as a starting point. Ideally, you use these estimates in combination with a more comprehensive analysis of your home and the local market performed by your Realtor®, when deciding on the final listing price for your home.