Is the Zillow Zestimate Accurate? 2020 Update
Anyone buying or selling a home in 2020 will frequently come across Zillow’s listing platform and the home-value estimation tool it uses: The Zestimate. Most take the Zestimate as a semi-accurate prediction of the home’s final sales price. But how often is that true? And what goes into creating the Zestimate?
Off by $20,000 to $50,000 in most cases.
Using Portland, Oregon as our subject for testing the Zillow Zestimate we look closely at the data. First we should note, Zillow has never claimed that the Zestimate is perfect. In fact, Zillow’s website clearly states that the Zestimate “is not an appraisal and it should be used as a starting point.” The disclaimer encourages buyers, sellers and the merely curious to do their own research. We, of course, would recommend they ask a local professional for a home value estimate.
765K Portland Homes; Millions of Zillow Data Points
According to Zillow’s figures, there are 765,000 homes with Zestimates in Portland, and the algorithm used to create those Zestimates takes in millions of data points. It uses data about the home’s physical characteristics, location and current market conditions to come up with a figure that attempts to predict how much a buyer would be willing to pay for a home. Data is available on sq. ft., lot size, beds, baths, tax amount, assigned school, location to amenities, and more. Zillow has also recently started to scan photos to determine color and condition. But of course, many homes have no photos of the interior available online and even Google street view is only updated every few years.
The Zestimate is Blind to these important factors, and may always remain blind.
- Interior and exterior condition of homes that haven’t been on the market in the last few years. (The average person in the U.S. stays in their home for 10 years before selling, so this is huge.)
- Interior and exterior condition of recent remodels even if they were on the market before recently.
- The layout of the property, its desirable flow and use of space.
Zestimate Accuracy Ranges for Portland
Want to dig a little deeper into the Zestimate? Both the Estimated Sales Range and Zillow’s own error rate disclosures will provide some insight into accuracy.
For Portland, the numbers show that 90% of Zestimates came within 5% of the final sales price. Given the average home price in Portland is $467,000, that means the Zestimate is off by as much as $23,000, 90% of the time and 10% of the time is off by more than $23,000.
On top of that, the Zillow Zestimate Cheats.
Yes, I’m calling the Zestimate a cheater. When a local professional, a licensed real estate agent puts a home active on the market and that home hits Zillow’s site – suddenly the Zestimate changes. It is like the student sitting next to you looking over your shoulder to see what answers you’re writing down on the test. Then low and behold! The Zestimate comes within 5% of the final sales price, because after the professional came up with a home value and listed it, Zillow quickly erased its answer and wrote one in that looked more like the pros.
How to look up Estimated Sales Range
For any listing on Zillow, clicking on the “Home Value” tab will bring up the Estimated Sales Range. This is Zillow’s estimate of the lowest and the highest price the home could eventually sell for. The Zestimate always falls within this range, but the difference between the high and low value indicates how much confidence Zillow puts behind that Zestimate. The greater the range, the more likely it is that there weren’t a lot of comparables for the home, or the uniqueness of the home makes it difficult for the algorithm to give it a specific value.
In the Portland area, Zillow’s Estimated Sales Range tends to exhibit a $20-$50,000 difference between the high and low ends. If you’re looking at a home with a wider range than that, there’s a much higher likelihood that the Zestimate is off.
How to Read the Zestimate Information Page
Zillow makes some efforts toward Zestimate transparency by providing localized error rates in a table on its website. However, as of this blog post, these figures have not been updated since June 2019. In addition, keep in mind that any company self-reporting its error rates is like a student giving themselves a grade on their school performance.
The first number provided in Zillow’s table is the Median Error. This is the percentage difference between the Zestimate and the actual price that the home sold for. Two Median Error rates are provided: One for active listings, and one for off-market homes.
Next, look at the “Within _% of Sales Price” figures. This is the percentage of times that the Zestimate was within 5, 10, or 20% of the actual sales price. For Portland, the numbers show that 90% of Zestimates came within 5% of the final sales price.
Portland Comparative Market Analysis or Zestimate?
An experienced sellers’ agent who knows the Portland market will be a much better predictor of your home’s final sales price, and can help set a listing price that will sell the home for the best market value.
Contact us today to get a Comparative Market Analysis for your home. It’s a free service that we offer our potential clients, and the best way to make an informed decision about whether to sell your home in 2020.
