How Accurate Are Zillow’s Price Estimates

Zillow, a website that promotes itself as the leading real estate marketplace, sends out something called “Zestimates” to homeowners. These are estimates of how homes are changing in value in real time, and in addition to having one of the most annoying names to say out loud, they also aren’t always very accurate. “Shoppers, sellers and buyers routinely quote Zestimates to realty agents – and to one another – as gauges of market value,” reported the Los Angeles Times recently, and yet Zillow’s estimates are often way off, which can put homeowners out of touch with the real value of their assets.

Imagine you’re selling your home, and Zillow says you should sell it for $400K. You might then get upset at your real estate agent, who is listing your home for only $375K. It can sow mistrust between you and your real estate agent, which is never a good thing. However, homeowners (and buyers) should know that Zillow’s Zestimates are on average 6.1% off the actual value of a home, which is a large number considering housing prices – around $14K. This disparity is because Zillow’s algorithm takes into account factors that are often reported inaccurately, like tax assessor’s property values and price records of homes in the area.

However, the margin of error for Zestimates can grow if any of these data points is missing. Some states do not require the prices houses sell for to be public knowledge, meaning that in these states, Zillow estimates are more like guesses. Prices can vary neighborhood to neighborhood, and even street to street. While getting a high Zestimate might be heartening, always get a second opinion (and trust your real estate agent – after all, they profit when you do). Bottom line, take that zZestimate with a grain (or a bucket) of salt.