Zillow is the most popular online real estate information site in the country with over 72 million unique visitors in December 2014 alone. Besides displaying properties for sale, it also provides a database of information for properties that are not currently on the market. By simply entering an address you can pull up key information including lot size, square footage, number of bedrooms and baths. It also provides a Zestimate.
Zestimates are Zillow's automated property value estimates. Zestimates have become a major issue for both buyers and sellers. Consumers routinely quote Zestimates to real estate agents when it comes time to buy or sell. If a house for sale has a Zestimate of $300,000, a buyer might take issue with a sellers' list price of $400,000. The other scenario that comes up quite often is when a seller asks a listing broker why they they should market their home for $550,000 when the Zestimate states a value of $665,000.
These gaps in real value versus Zillow's Zestimates are becoming common place. Consumers more and more are taking Zestimates as gospel and if someone won't budge of their perceived value (Zestimate) it often can stop a deal in it's tracks.
The big question remains, how accurate are Zestimates. Zillow estimates that nationally Zestimates have a "median error rate" of about 8%. On a $500,000 house that is $40,000 disparity. The biggest issue with Zestimates is that in localized markets the median error rate can be far higher. For example in Manhattan the error rate is 20%, in rural counties in California the error rate is a s high as 26%. In the Lakes Region of New hampshire I have personally witnessed some homes being off by as much as 30%. On a lakefront home with a value of $1,000,000 that equates to a difference of $300,000. But Zestimates aren't always on the low end of the value range. In carlsbad California, Zestimates came in below the selling price 70% of the time according to Solutions Real Estate.
So what is the public to do with their own Zestimate? Treat them as a starting point when discussing pricing. When it comes time to find the actual real value rely on the real estate professionals in your home market or get an experienced appraiser.
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credit: Washington Post