What’s up with Zestimate Accuracy?
While promoting their new book, Zillow CEO was asked about their accuracy of their website’s automated property value estimates they term a Zestimate (called an AVM in the industry).
On the CBS The Morning Show, Norah O’Donnell asked are “Zestimates accurate? And if they’re off the mark, how far off?”
Spencer Rascoff, Zillow CEO, answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8%.
That’s right, nationally there is an error rate of 8% built into their estimate. That means it could be spot on with some properties while others off by an even greater amount (north of their median 8 percent).
Over the past ten years, Zillow has grown to be the most popular online real estate information site. It provides detailed information on properties for sale and those not on the market. Want to know what a home is worth? Simply type in an address and get the property Estimate. They call it their Zestimate.
When home buyers are out looking at homes, they commonly use these figures as a basis of comparison to see how the seller price their home for sale. Having a weak Zestimate means a buyer will use it as leverage against the seller to make an offer.
Real Estate agents must use tools they have at their disposal to provide their clients with reliable data on the home for sale. This includes comparable homes for sale, those that recently settled and other factors not available to Zillow but available to a real estate professional to help determine a strong price to offer on a property for sale.
The main challenge for home buyers and sellers today is to have reliable data when considering pricing their home for sale or purchase says Dave Geipel of Home Marketsite Realty in Pennsylvania. “The Zestimate cannot be taken to the bank,” adds Geipel.
Any home purchased using a mortgage requires an appraisal. A licensed Appriaser is sent to the home for sale and a report is prepared specific to that property. The bank uses that information to determine if they will lend the money (the full amount based on the loan).
There have even been local real estate agents who have studied their local market and have discovered even greater discrepancies in pricing.
Robert Earl of Choice Homes Team in Charlottesville, Va. surveyed prices from their local MLS and Zillow in his area. Of twenty one properties that sold in July 2014, Zillow overestimated values on 17 homes including two houses that sold for 61% below the Zestimate.
Of course, Zillow has a response to these and other critics:
Look at the Estimate as “no more than starting points in pricing discussions with the real authorities on local real estate values.” Rascoff’s advice should be taken. In order to get the best price when you buy or sell, use a real estate agent. So is the Zestimate Accurate? You decide or have a real estate agent at HMSRE lend you hand.