"Shoppers, sellers, and buyers routinely quote Zestimates to realty agents - and to one another - as gauges of market value," said the Los Angeles Times. "If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers' list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000. Disparities like these are daily occurrences and, in the words of one realty agent who posted on the industry blog ActiveRain, they are ‘the bane of my existence.'"

Why can Zillow's computer-generated estimates be so wrong?

1. Price errors  Sometimes the recently sold prices that Zillow uses are not appropriate. I have a personal example of this - the house next door to mine is a mirror image of mine. Same floor plan, same lot. Recently one of the owners bought out the other owner, and the sale for half of the actual value of the house was recorded with the county. Zillow's computers saw that sale and assumed that the purchase was for the entire house rather than a half interest - and promptly dropped the estimated value of my house by over $100,000.


2. Lacks neighborhood knowledge  Zillow doesn't know the neighborhoods. All of us know of neighborhoods where which side of the street a house is on can make a significant difference in the price. And adjacent homes can be in different school districts, and that can make a big difference in price. Or maybe one house has a view over a lake and the house across the street has a view of an apartment building.


3. Lacks knowledge of home condition  Zillow hasn't been inside your home. Did you just invest $50,000 in a kitchen upgrade? Does your neighbor have an original 1970s kitchen? Have you lovingly kept your home in top condition? Does that eyesore on the next block show the results of 20 years of deferred maintenance? Zillow doesn't know that.

Zillow admits that their Zestimates are just a starting point. And they do publish the data on how accurate Zestimates are. In the Sacramento region almost 20% of the Zestimates are more than 10% off the actual selling price. That means that for homes with an actual value of $400,000, the Zestimate on 1 out of every 5 homes will be more than $40,000 wrong!

Wow - if my estimates of home values were as far off as Zillow's I'd be looking for a new job. Fortunately, I'm able to do what Zillow cannot.

1. Pricing  When I look at recent sales I can look at details that Zillow doesn't see. Was it a sale from one family member to another? That price may have artificially low. Was it a foreclosure sale? That can also explain a low sales price.

2. Neighborhood knowledge  School districts, busy streets, noisy businesses, views, access to parks - these are all factors I can take into account when assessing the value of a home.

3. Home condition  This is where Zillow really fails, and where having an agent assess your home's value is most important. When looking at recently sold homes I not only look at the price and size of each home, I look at the condition of each home. What are the upgrades? Is there deferred maintenance? Is the yard maintained and attractive? And if I need more info I can call the agents involved in a transaction and ask for more information.

Are you thinking about selling and wondering how accurate the Zestimate on your home is?

If you have any questions about any of this or Real Estate in general, just let me know - I'd be really happy to help! You can call me or email me at the links below. Or better yet - text me at 916-596-5465.