Zillow is a powerful tool for buyers, sellers, and realtors alike, and most searches for a new home these days - around 90% - will begin on that, and other, platforms. It provides an incredible window to the marketplace and gives everyone a readily accessible view on most of the available properties. Put simply, if your house is not on Zillow, then it might as well be invisible!
But one thing that clients often ask is: "does the 'Zestimate' on Zillow actually reflect the true value of my house?"
The Zestimate is derived from an algorithm - basically a mathematical calculation - called an Automated Valuation Model, or AVM for short. The AVM takes all of the available data, from previous home sales in the local area and then works out what it thinks the price of your house might be, based upon previous prices and more recent sales. As such, there is a lot of data behind those numbers and many people pay close attention to them.
The reality of any transaction, however, is that it occurs when a motivated buyer meets a motivated seller; they then reach agreement on a price that they mutually believe reflects the value of the house that is the subject of that sale. To reach that agreement involves a complicated mix of hard-headed financial calculation and pure emotion: if I want this house more than you, then I may well be prepared to pay more for it!
Here's what Zillow has to say about the accuracy of the Zestimate:
The Zestimate is not an appraisal and you won't be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate as the basis of any specific real-estate-related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for.
So even Zillow admits that the Zestimate may be 'incomplete or inaccurate'. A recent article in the Washington Post suggests that the number, compared to final sales prices, came within 5% of the actual value in around only half the time. In any profession, including realty, if our judgement was nearly right, but only half the time, then people would, quite rightly, loose faith in us!
One of the main reasons for this is something that Zillow admits on their website: "we have not physically inspected a specific home." Purely looking at the numbers doesn't say whether location A is better than B; or if house C was remodeled to a higher specification than D. Zillow doesn't know whether a new road is being constructed that will open up an area, or a new business is expanding and bringing in people from outside the city.
Zillow does not look inside the homes, and around the local area, in the way that a realtor does.
So, to answer my original question: is my home worth what Zillow says?
No. It's a start and it's worth looking at, but it can never replace the skill and judgement of a local realtor. It takes a long time for changes in the local marketplace to filter through into the numbers and in the meantime you might ask far less than the house is actually worth.
Always discuss the Zestimate with your realtor - and a good one will probably mention it anyway - but remember that it can never replace the knowledge and understanding of the local marketplace that only an experienced realtor possesses.
I have a passion for real estate, whether you are selling your own home, or you are looking for your next one - let me be the one who guides you through the process and takes the strain, so you don't feel the pain.
Houses by Bill Dickinson. https://flic.kr/p/pZfhMo
Tiny Houses by Bill Dickinson. https://flic.kr/p/pZfhMo