The Risk of Relying on Home Value Zestimates

Earlier this month the Seattle Times reported on a recent Zillow Zestimate for a home in Belfair on the Kitsap Peninsula. The Mason County assessor’s value of the home was $283,000. The home recently sold for $225,000 (below market value because the home was headed for foreclosure). A Zillow Zestimate published the home’s value at $1.8 million  –  700% higher than the county assessor’s office, several real estate companies and just about any local Realtor® who knows and understands the local market. This is an example of how algorithms can go wrong.

flickr/Robert Couse-Baker

The Zillow real estate website is both loved and hated by buyers, sellers,  appraisers and real estate professionals. This recent error in valuation is a classic example why Zillow’s Zestimates should be taken with a grain of salt. Zillow is a popular real estate data company that provides real estate data on millions of homes throughout the United  States. Zestimates are created using algorithms, publicly available sales and market data. Zillow has no real estate brokers  –  no one from Zillow has ever visited the homes or neighborhoods for which their estimates of value are provided.

Zestimates can be a good place to start for general information on home or neighborhood values, but keep in mind a Zestimate is not an official appraisal. Zillow itself recommends anyone serious about selling their home obtain a market evaluation from an experienced local real estate broker. Zillow publishes a Zestimate accuracy table on the website for most major metropolitan areas. For the Seattle market area the Zestimates published have a margin of error of + – 4.5%. While that may not sound like a lot, consider a home with a value of $500,000. With a 4.5% margin of error the price on that half million dollar home could be as low as $477,500 or as high as $522,500. That’s a pretty big spread.

Zillow is a good resource for locating properties listed for sale or rent or for general information on home values in a particular neighborhood or city. Buyers and sellers shouldn’t rely on a Zestimate for an accurate estimate of market value. For an accurate evaluation of what a home is worth, contact an appraiser or real estate broker. Brokers and appraisers have local real estate knowledge and experience, have been inside hundreds of homes, are familiar with the features and amenities of each community and know how location, condition, view, home and lot size, upgrades, etc. can have an impact on property values.

The seller of the Belfair home contacted Zillow regarding the $1.8 million Zestimate. Zillow admits the error was partly due to human error and has been working to correct the published value of the home.

Posted on March 15, 2018 at 9:30 AM
Robin Myers | Category: home property values, real estate | Tagged , , , ,

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