Is the Zillow Zestimate Accurate? 2022 Update
If your look up your home’s value on Zillow’s valuation tool, Zestimate®, you may feel strongly impacted by the price that comes up. It may not be accurate, though. Zillow even says so on their site. So, why is that? And what good is it if you can’t count on it to give you an accurate estimate on your home’s worth?
They post this disclaimer: “A Zestimate incorporates public, MLS and user-submitted data into Zillow’s proprietary formula, also taking into account home facts, location and market trends. It is not an appraisal and can’t be used in place of an appraisal.” (They even provide a table of error rates for cities across the U.S. within 5%, 10%, and even 20% of the sales price.)
Zillow lost 881 Million Dollars in 2021, Trusting its own Zestimate
According to the WSJ, Zillow’s dependence on its own home value data caused it to lose nearly a billion dollars over the course of one year. Zillow has since shuttered its home buying business.
So, essentially, what this means is that their estimates are only as good as the data that’s available. Also the reason it isn’t very accurate most of the time is due to intangibles the data isn’t currently accounting for. Interior condition is difficult (read next to impossible) for a computer to calculate, but interior condition can swing a home’s value by hundreds of thousands of dollars. This interior condition includes not only remodeling or lack thereof, but layout. Similarly the lot can be well laid out or not, landscaped or not. The street the home is on can be full of cared for lawns and properties or have many recent visible neighborhood problems. Bottom line, the Zestimate doesn’t mean much, it is a basic number crunch on sq. ft. and lot size, but one that doesn’t come close to an actual specific value.
How is a Zestimate Calculated?
To reach an initial value on a home, Zestimate® takes into account the following:
- Known Home Characteristics—basics like square footage, number of bedrooms and bathrooms. If your house is not on the market, they’ll use the information available from the last time the home was listed.
- On-Market Data—data from active listings like number of days on the market, listing price, and comparable recent sales in the listing’s area.
- Off-Market Data—other data like prior sales and tax records. That’s why you might find your home on their website, even if it isn’t currently on the market.
How Did “Zillow Offers” Change the Zestimate?
In 2018, Zillow launched their Zillow Offers program, intended to flip homes. So, in essence, they added themselves to the growing collection of iBuyers. Don’t know what iBuyers are? They’re companies who buy homes online. The attraction to these types of services is the transactions are quick, sparing the seller from the sometimes long and inconvenient process of showing their home and accepting offers.
The downside can be a costly one, though. As with all online real estate buying entities, Zillow Offers existed to make money. For Zillow, not you.
So why are we talking about Zillow Offers in past tense? Because Zillow decided to end the program near the end of 2021 due to what they called “an unpredictability in forecasting home prices.”
Are Portland Zestimates Accurate in 2022?
Zillow claims a 1.9% error rate on Zestimates for the Portland area for current active listings. They also claim that 84.3% of Zestimates came within 5% of the sale price. Not too bad, right?
Scroll down further, and you’ll see their numbers for off-market homes. In this table, Portland has a 5.2% error rate with 48.5% within 5% of the sale price. So, why such a difference? Let’s give an example of an $800,000 Portland home. This means the actual value could be as low as 758,400 or as high as $841,600. Basically a ballpark for that homes sq. ft. and lot size in a given area.
Data for active listings changes on Zillow’s site as soon as the home is listed by the real estate agent and the home has received a professional evaluation. So, Zillow’s claims for accuracy on listed homes doesn’t come from them at all. It’s borrowed information from credible sources. That’s the only reason it comes in at 1.9%, because it’s not their data.
Zestimate® is Not the Best Resource for Selling Your Home
If history is a teacher, Zillow’s bottom-line concern is themselves. The Zestimate® could just make you think you’ll be getting more money than you actually will (or less). It exists to keep you coming back to their website.
The Best Way to Get an Accurate Home Assessment: Work with an Experienced Realtor
Unlike mega corporations, Realtors have a fiduciary duty to put their client’s interests above their own. If you want to sell you home (now or in the future) and be assured that your asking price is the best it can be, reach out to a local Realtor. Of course, we’d love it if you talk with our top 1% sellers agents. We offer 4% max. commission to sell a home in Portland and have completed over 2,000 local home sales. We’re standing by! Give us a call at 503-714-1111 or chat with the bot on our site.
Just Curious and Want Better Options?
Check out our top 4 websites for free online home value estimates here. In the article we explain why one home value estimator is better than another.May 9, 2022