Why The Zillow Zestimate Is Less Accurate Than It Looks

Far too many times people put way too much stock in the Zillow value of their home. It is so common that when I prepare for a listing presentation, I always check the Zillow value first, so that I know what is going through the mind of the Owner. Inevitably I have to educate Owners on the accuracy of Zillow, and how their valuations are determined.

I found the following post to be one of the most informative that I have seen. The Source is HomeVisor LLC, and the post was published by Brett Doshan.

Why The Zillow Zestimate Is Less Accurate Than It Looks.

A few months ago we wrote about the accuracy of the Zillow Zestimate, or maybe we should say, the Zestimate's lack of accuracy. This is obviously a hot topic - a Google search for ‘Zestimate accuracy' will quickly illustrate that there are a lot of questions and frustration around the Zestimate. Additionally, our Zestimate accuracy blog post is one of our most viewed posts.

We are actually big fans of Zillow, and we fully understand that no predictive valuation system is perfect, however we do have a major issue with the way Zillow calculates its accuracy. From its website, here is how Zillow calculates its accuracy:

Zestimate accuracy is computed by comparing the final sale price to the Zestimate on or before the sale date.

The important thing to note here is that Zillow uses the Zestimate ‘on or before the sales date.’ That is our issue – that they use the Zestimate after the listing price becomes public. That makes their Zestimate look more accurate than it really is since, what you will see in the data below, the Zestimate can change dramatically based on the listing price. Let me pose this scenario to you – say the Zestimate on your house is $439,000, you then list it for sale at $1,495,000, after your listing price is made public and picked up by Zillow, the Zestimate then increases to $1,200,000! This is a real example – you can check it out at this link. Let me ask you this, would you consider $439,000 accurate if you just listed your house for $1,495,000? That is a difference of over $1 million.

Here is the rub for us – if this house sells for, say, $1.35 million, Zillow will use its most recent Zestimate of $1.2 million when it calculates accuracy. That calculation will say that this house sale was within 11% of its Zestimate. This would be consistent with their claim that nationwide, 78.8% of all sales occur within 20% of the Zestimate.

However, a more honest assessment of their accuracy would be to use the price before the listing was public – to do that we use the Zestimate of $439,000 and a sales price estimate of $1.35 million – which puts the sales price at over 3x the Zestimate, not nearly as accurate!

That being said, we only had to look at a handful of For Sale listings in each city to find these examples, which leads us to believe this pattern occurs fairly often.

Are we cherry-picking listings to prove our point - of course we are! However, it does prove our point, the Zestimate can be very inaccurate and can move a lot based on the listing price. Looking at the three examples above, on average the Zestimate more than doubled after the house was listed for sale. And that, in our opinion, is what makes the Zestimate accuracy look much better than it actually is.

Our advice, as always when it comes to Zillow, is to use it as a data point during your research, but not to rely too much on it.

Reposted by:

Mark Vandervest, Principal Broker
Mark Vandervest, P.C.
Extraordinary Real Estate Representation &
Property Management
503-941-0775 Office
503-941-0776 Fax
www.TheOregonBroker.com