Why Zillow Estimates are Wrong

By
Real Estate Agent with Long and Foster DC AB15253
https://staging.activerain.com/droplet/4TSX

You want to know how much your home is worth, so what do you do? If you are like many buyers and sellers around the country, you go to Zillow to get a valuation of your home. But how does Zillow actually work?  Is it accurate? Can you rely on it? Should you rely on it? 

 

Sites like Zillow utilize an automated valuation model (AVM) to determine the worth of a property. Automated valuation models rely on basic property characteristics like the number of bedrooms and baths,  square footage, publicly available data, price trends and local market information to arrive at an estimated value for a property.  The name AVM says it all - it is an automated model.  It does not allow for variables that will give you an accurate valuation. 

 

Zillow works on the averaging principle. Using a complex proprietary math equation Zillow analyzes numbers from past sales (comps) to estimate your home's worth.  Simply stated, Zillow values your home without ever seeing it.  Obviously a valuation without seeing your home is going to be only an estimate.  Even Zillow CEO Spencer Rascoff said that the Zillow estimates are only a starting point with an 8% median rate of error.

Why isn’t Zillow Accurate? There are several reasons for this.

Zillow does not have a way of evaluating property condition and capital improvements. Zillow doesn’t know if I still have the pink shag carpet from my childhood or the new Brazilian cherry hardwood floors I put in last year in my basement. It doesn't know anything about my home except square footage and the number of bedrooms. Even if my home is surrounded by homes that have a similar square footage, do I really think my Zestimate is going to be accurate if it can’t take into account property condition?  

Zillow doesn't have a way of evaluating the location of a particular home within the community.  You know that a home under a high voltage transmission line is going to have a different value than one in the same community on a quiet cul de sac out of sight of that power line.  A home near the playground of the local elementary school will likely have a different value than one backing to a high school parking lot.  

Zillow doesn’t distinguish between colonials and ramblers, condos and single families.  A valuation model limited to bedrooms and square footage won’t distinguish between architectural styles but everyone will agree that there is a difference in consumer preference between colonials and ramblers or condos and single families that will affect value.

Zillow doesn’t distinguish between types of sales. A property sold between family members may well have a different price than the same home sold on the open market.  Similarly a property sold as a short sale or after a foreclosure will be valued differently by consumers – but not by Zillow.  But you know very well that your neighbor’s short sale did not bring the same price that you should receive for your home. 

As a local Realtor with 28 years experience, I understand those differences.  If you are interested in finding out the real value of your home, please call me at 240-401-5577 for a complementary, no obligation analysis that considers all the relevant variables or email me at lise@lisehowe.com! Don't guess! Find out! 

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Re-Blogged 8 times:

Re-Blogged By Re-Blogged At
  1. Debbie Reynolds 08/05/2016 05:00 AM
  2. Lottie Kendall 08/05/2016 12:22 AM
  3. Debra Leisek 08/05/2016 03:26 AM
  4. Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC 08/05/2016 05:42 AM
  5. Fred Griffin 08/05/2016 08:46 AM
  6. Kathy Schowe 08/05/2016 09:07 AM
  7. Gabe Sanders 08/16/2016 04:35 PM
  8. Winston Heverly 11/12/2016 09:07 PM
Topic:
Real Estate Technology & Tools
Tags:
zillow zestimate
lise howe group
why is zillow wrong

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Rainmaker
554,296
David Alan Baker Laveen Realtor & South Phoenix Realtor
HomeSmart - Laveen, AZ
Your local Expert

Forgot, they also sell their leads to lenders. Crazy, I've heard of some who spend thousands for their leads..............insane I think.

Aug 07, 2016 03:51 AM #63
Rainmaker
371,991
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Specializing in Brookside, Waldo, Prairie Village

Good explaination, going to keep this one and refer to it when people ask me about these estimates.

Aug 07, 2016 06:41 AM #64
Rainmaker
630,417
Carol Williams
U.S.: I specialize in helping agents who have been in the business 2 years or less create a thriving business. - Wenatchee, WA
"Customized Mentoring & Marketing Services"

Bravo Lise!!!   Everyone should memorize this dissertation.  I'm bookmarking it so I can go back a find it at will.   Thanks for the post!

Aug 07, 2016 07:39 AM #65
Rainmaker
468,573
Karen Feltman
Cedar Rapids/Iowa City, IA Lepic-Kroeger REALTORS - Cedar Rapids, IA
Relocation Specialist

I am the one that brings Zillow up when I first meet with potential buyers and sellers.  Even if they don't bring it up, I beat them to the punch.  With sellers, I have their Zestimate with me.  With buyers, I explain where the information comes from and its inaccuracies in our market.  It only take a couple of times of the buyer sending me homes that they saw on Zillow that are sale pending or they sold months ago to get the point across.  Thank you for the great post!

Aug 07, 2016 12:18 PM #66
Rainmaker
777,550
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

So true!  Zillow doesn't have as comprehensive of information and you're right, won't know about that pink shag carpet!  I also tell clients that homeowners can add their own FSBO listing to the mix, and most likely those are not accurately priced either.  

Aug 08, 2016 02:58 AM #67
Rainmaker
698,551
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

A brokerage was refin his commercial bldg. He bought a RA zning home on a major street so I asked him what his commercial property is worth.  He said Z says it is worth ... What do you think?   He has 12 agent worked under him. He has no clue what his commercial bldg is worth? 

Aug 08, 2016 04:29 AM #68
Rainmaker
1,222,165
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Area Real Estate

I guess that we still have to get the word out there about how unaccurate they are.

Aug 08, 2016 06:06 AM #69
Rainer
234,250
Mark Robinson
Geneva Financial, LLC - Beachwood, NJ
Honesty, Integrity, Service

Great post Lise. Zillow often compares a multi-family to single family homes too!

Aug 08, 2016 09:25 PM #70
Rainer
14,390
Tari Reph
Coldwell Banker Schmidt FOC - Westlake, OH
Designated agent for Lorain and Cuyahoga Counties

Great post!  I am a new agent and I am still learning resources that I have to work with along with resources that work against me.  I will print this post and use the information when have this kind of conversation with my clients.  Thank you!

Aug 09, 2016 05:59 AM #71
Rainer
340,126
John Dotson
Preferred Properties of Highlands, Inc. - Highlands, NC - Highlands, NC
The experience to get you to the other side!

Zillow, Trulia and Realtor.com are all a bunch of blood sucking poor excuses for a REAL agent.

It actually ticks me off when I get phone calls that start with "I saw this listing on ...fill in the blank... and I want to know...)

Aug 09, 2016 06:50 AM #72
Rainmaker
2,970,426
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good morning Lise Howe,

Great post that Debra Leisek reblogged. We are a privacy state so Zillow is throwing darts in the dark to formulate valuations on homes!

Aug 09, 2016 09:22 PM #81
Ambassador
3,291,393
Praful Thakkar
eXp Realty - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Lise Howe - well, it's Zillow's marketing that brings consumers to their site. And yes, they do disclose how far they are from true value of the home!

Good news is, this is where we can become a 'hero' isn't it?

Aug 10, 2016 02:50 PM #82
Rainer
193,905
Athina Boukas
Athina Boukas, Broker/Owner (Greensboro, NC) - Charlotte, NC
Broker/CRS

Values are so subjective that property appraisers can also have a significant value difference between them.  In the end, the next buyer determines the value.

Zillow is a tool for buyers to begin to see what's out there. The site is intuitive and easy to navigate, so it is impossible to tell buyers to "stay away" from it.  It's up to us to educate our buyers and sellers.

Aug 11, 2016 02:41 AM #83
Rainmaker
99,843
Melissa E. Spittel
Coldwell Banker Residential Brokerage - Westminster, MD
"Achieving Results Together "

I'm so tired of explaining to clients that they can't rely on Zillow and the inaccurate guesses. Fortunately, most clients understand after I offer an explanation, but it's still a pain. 

Aug 12, 2016 05:08 AM #84
Ambassador
1,892,817
Debe Maxwell, CRS
www.AtHomesCharlotte.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

What a spot-on post, Lise!  Congrats on the feature!  I JUST got off of my phone with my son, who is relocating and I told him not to dare phone, click any 'contact me' buttons or do ANYTHING but, look at homes there...ONLY contact his real estate agent for the REAL scoop!  It's just such a deceptive site and it truly costs us lots more hours of work, dispelling the faulty estimates and looking up properties that have long since SOLD that are still showing up as actives too!  GREAT post!

Aug 12, 2016 01:17 PM #85
Ambassador
2,770,587
Bob Crane
Woodland Management Service - Stevens Point, WI
Forestland Experts! 715-204-9671

We all know the numbers are wild, but once a person hears a number they like, its hard to get them to listen to the real value.

Aug 15, 2016 03:42 PM #86
Rainmaker
21,198
Cheryl /D'Marcicus Childress-
Keller Williams - Richardson, TX
"The Childress Team"

Great post! Will keep this informaton as a resource for my clients. Thanks for explaining it in layman's terms.

Sep 01, 2016 11:03 AM #87
Rainmaker
1,256,820
Lise Howe
Long and Foster - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

Cheryl /D'Marcicus Childress- - you are more than welcome - and welcome to Active Rain (a bit late on my part!) 

Sep 01, 2016 11:47 AM #88
Rainmaker
1,243,961
Sandy Padula and Norm Padula, JD, GRI NMLS#1483386
Realty One - Carlsbad, CA
Presence, Persistence & Perseverance

You are correct in your analysis on Z,  Lise Howe . Yet even with all the algorithms, it still cannot correct these errors. I guess humans are not dispensable after all!

Nov 12, 2016 09:31 PM #89
Rainmaker
125,030
Foster Smith Summerville
Carolina One Real Estate - Summerville, SC
Summerville & Charleston Homes for Sale SC Realtor

Just came over after your article was re-blogged by Winston Heverly. Great explanation. Clear, concise and accurate!

Nov 16, 2016 08:07 PM #90
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Lise Howe

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