The Truth About Zillow
Recently I've gotten more and more questions about Zillow and the accuracy of the information it presents. Below is a short look at some things you should know about Zillow. (Impatient readers skip to the bottom for a better alternative).
How Accurate is Zillow's Zestimate?
Let's look at what Zillow has to say about itself first: Zillow reports that its median price error for homes in the Denver Metro area is 5.1% How much could 5.1% affect the price?
Home Price: $300,000 +/- $15,300 $284,700 - $315,300
Home Price: $400,000 +/- $20,400 $379,600 - $420,400
Home Price: $500,000 +/- $25,500 $474,500 - $525,500
Anywhere from $15,000-$50,000. That's not even the worst part. Zillow reports that less than half (49%) of its Zestimates are within 5% of sales price. This means that over half of the Zestimates for homes in Denver are off by 6-20%
"Over half of the Zestimates for homes in Denver are off by 6-20%"
How much is Zillow off by?
Based on Denver's median home price ($355,000) and Zillow's self reported median error for Denver (5.1%), Zillow's typical error for homes in Denver is $18,105.
"Zillow's typical error for homes in Denver is $18,105."
I'm a buyer and I look for houses on Zillow
Unfortunately, it's not uncommon to find an "active" listing on Zillow that actually sold months or even years ago. Zillow does not update their listing information reliably or consistently. You as a buyer could be wasting time looking at houses that aren't even actually for sale. Zillow wants you to contact one of the agents it has displayed on the right side of your screen. They'll then take your information and sell it to those agents.
Where does Zillow's data come from?
According to Zillow: (emphasis added is mine)
“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.”
"Most upgrade information is not in the public records, and is not easily quantifiable. We do not know about home updates and remodels unless they have been reported to the local tax assessor, so those items are not used in Zestimate calculations. While we do utilize user-submitted data that is measurable, (e.g., additional bedroom count, bath count, and square footage) there is no way for us to systematically gather and verify the type of remodel or build information where the value is based upon how the final product appeals to the buyer. Because of this, the algorithm can’t use that information."
In short, Zillow uses and in-house algorithm that analyzes data from public record.
Zillow cannot account for:
Additionally, when calculating home price, Zillow uses years worth of data. Most real estate professionals in Denver use 30-60 days of data when listing a home. The market here in Denver changes rapidly and neighborhood activity fluctuates weekly.
How should home price be determined?
When I list a home, I want to have the most complete picture and understanding of current buyer behavior. It is the buyer, not the seller or listing agent, that determines what a house is worth.
How much is your home worth?
If you'd like to know how much your home is actually worth, contact me for a free competitive market analysis.
What should I use to search for homes?
Let me introduce you to recolorado.com. Recolorado is the public version of the MLS. It is the most accurate and up to date system available. It is also free, and unlike Zillow, they will not collect your contact information and sell it.