Tuesday, February 26, 2013

Zillow Zestimates, A Good Starting Point

Informed people are happy people...provided the information is accurate. Real estate buyers have loads more information to process today and the value of that info is directly related to how much effort is put into the processing. Zillow.com is one source of the new information home owners and buyers are looking to for real estate values. I'm a fan of Zillow for it's value as a starting point in the real estate pricing conversation.

Zillow calls their value estimate a Zestimate. It's  a number arrived at using automated software designed to be neutral and unbiased. The Zestimate may factor in too much information, such as too broad of an area crossing neighborhood and school district boundaries. On the other side Zillow may have considered too little information, such as overlooking location in a neighborhood, or improvements.

Zillow does a terrific job of cautioning the user of their site and disclosing their limitations on accuracy. For example, go to Zillow.com and scroll down to the bottom of the page and click on: Zestimate. Selecting Wisconsin, and then Dane County, I see they disclose that their data includes 165,400 property sales. They claim their Zestimate is within 5% of the sale price for 42.5% of the properties. However, they are within 20% on 84% of the properties. If your goal is to not overpay for a property or to not leave too much on the table when pricing to sell, you will want to fine tune that 20% in Dane County where ten and twenty percent can mean twenty and forty thousand dollars.

Realtors  and appraisers who know the market area and know how to make adjustments for the differences of value between neighborhoods, streets, homes, and amenities can get the price zeroed in the way a telescope brings into focus the fine details.



This is Zillow's explanation (copied from their web site) of a Zestimate:

The Zestimate® (pronounced ZEST-ti-met, rhymes with estimate) home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value. The Zestimate is calculated from public and user submitted data; your real estate agent or appraiser physically inspects the home and takes special features, location, and market conditions into account.  We encourage buyers, sellers, and homeowners to supplement Zillow's information by doing other research such as:

  • Getting a comparative market analysis (CMA) from a real estate agent
  • Getting an appraisal from a professional appraiser
  • Visiting the house (whenever possible)

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