A Few Thoughts on Zestimates
I have had several inquiries recently about incorrect real estate information on the site Zillow.com, particularly as it relates to their “Zestimate” valuation tool. As the site states, “A Zestimate home valuation is Zillow's estimated market value. It is not an appraisal. Use it as a starting point to determine a home's value.”
As I have noted in my replies, neither our office nor our agents have the ability to remedy incorrect information on the Zillow site.
Zillow.com gets the majority of its information from publically available data sources such as tax records, PVA info and recent sales information. Unfortunately, if the data from any of these sources is wrong it impacts (often significantly) the value of a home’s Zestimate. Homeowners can join Zillow and manually enter information about their homes. They then must choose to make this information “public” so the site can include the homeowner’s data in their valuation model.
I’ll give you an example of how wildly inaccurate a Zestimate can be: Say someone purchased a house in 2005 for $200,000 and it was 2,000 square feet ($100 per square foot). In 2007, the homeowner added a 600 sq foot family room/kitchen addition (investing, say, $120,000). Unless this homeowner joins Zillow and manually enters the information about adding the square footage and other renovations, Zillow and its Zestimate will attach a value to the house based on the data is has, i.e. that the homeowner paid $200,000 for it in 2005 and assuming it is still only 2,000 sq ft.
I have yet to see a Zestimate that, in my opinion, “over values” a house. In the handful of examples I have checked on, Zestimates have undervalued houses by anywhere from $50,000 to more than $200,000 depending on the amount of renovations, etc.
When my clients ask me about Zillow and why their house has such a low Zestimate, I try to put it in broader perspective. I say that a Zestimate is only a tool and it’s only as good as the information that it has access to (ever heard the phrase “garbage in, garbage out”?). Zestimates actually help real estate agents because they reinforce that determining a house’s value is far from an exact science. You can’t just dump a bunch of numbers into a blender and come up with the “magic number”. Determining a house’s market value requires some quantitative data (i.e. square footage, $$ amount of renovations), but just as much if not more qualitative data (i.e. this house has structural problems, this house is 3 doors down from a crack house, the house next door was not on the MLS but sold for $25,000 over the asking price, etc).
Post a Comment