If you’ve ever thought about buying a home then surely you must have seen the thousands of commercials about Zillow, the largest growing online realtor available. Not only can Zillow help you find your perfect dream home in every available city and town across the U.S. but one of their most valuable features called “Zestimate” is their ability to show the proprietary estimate of a home’s current market value via Zillow. However, while this is a useful tool for many homebuyers or potential homebuyers out there, one question I think that we should all be asking ourselves is how accurate is this Zestimate feature and in turn, can you really trust it?

How Zestimate is Calculated

Unfortunately, Zillow can’t reveal exactly how they calculate their process for making home price estimates. While Zillow has tried to be as transparent as possible in terms of revealing to the public how they make these estimates and have even frequently reiterated that that is just what they are, they still aren’t 100% accurate.

From the limited information that we know about Zestimate, it’s safe to say that Zestimate is recalculated every day and is based on publicly available data that was submitted by users.

Publicly recorded data allows Zillow to determine how much homes within an area were sold for, paired with user-submitted data this allows them to learn about specific characteristics that made the home and area appealing. Factors that really make and break a home could be weather the entire property were freshly renovated or how many bathrooms there are. With Zillow’s data, there’s even the availability to determine how quickly homes in a neighborhood are being sold and if those homes are being sold above their asking price.

While all of this data collection may seem fairly rigorous and complicated, for Zillow the data allows them to estimate the price of a single home.  Some markets may be more off than others.  For example California has several outlier cities with higher than average real estate property prices.  Cities like San Diego and San Francisco are notorious for high selling prices.  Where as Phoenix and Orlando being different markets have a larger percentage of accuracy.

How these estimates can sometimes be innacurate

While Zillow seems fairly complicated and accurate, there’s only so much that their software is able to do as many times it’s forced to make an educated guess. Because each home is different, it’s improbable for Zillow to know what makes each and every single home in the U.S. unique for its area. Because of this, it isn’t too far fetched to come to the conclusion that Zillow’s home estimates can be inaccurate.

According to Zillow’s own website, they claim that Zestimate only has a 4.3% median error rate. This means that with the 4.3% median rate, Zillow’s home estimates are within the home’s true value nearly half of the time. On their website, Zillow also indicates that 86.9% of the time, their Zestimates are within 20% of the sales price. However, it’s important to realize that such a large percentage margin can mean tens or even hundreds of thousands of dollars in difference.

This means that Zestimate is meant to serve as a starting point for all homeowners or potential home buyers. It can give you an idea of what a home might sell for and shouldn’t be the ending of a conversation but serve as the beginning.

What experts have to say

A 2014 article by Washington Post’s author, David Howell, who serves as the chief information officer for McEnearny Associates. Howell writes, “No algorithm, however sophisticated, can quantify the value of a kitchen that was remodeled just before a home was put on the market or a yard that is poorly maintained. It simply isn’t possible for any Automated Valuation Model (AVM) to predict the value of a home with a level of accuracy sufficient to make a housing decision.”

Howell continues to point out that many consumers tend to get focused on the numbers they find online when in reality they should be seeking out the advice of a real estate agent who knows the local housing market like the back of their hand.

Zillow even points out on their own website that if a customer decides to go with a real estate agent, they should consult the Zestimate real estate numbers as a reference point.

Conclusion

When it comes to finding a home, it can be difficult, but for all of you homebuyers and potential homebuyers out there it’s better to seek out a real estate agent and use any numbers you find with Zestimate or on Zillow as a reference number.

Finding a home can be difficult for anyone looking to purchase a home, but it doesn’t have to feel difficult.