Is the Zillow Zestimate® Accurate? 2023 Update
These days, anyone interested in selling or buying a home is familiar with the home search engine Zillow and the proprietary Zestimate® formula it uses to place an estimated value on a property. Many times people will be motivated to make decisions about selling their home based on the Zestimate® they discover online. Or buyers may feel like they must offer a certain price based on a number generated by Zillow. But unfortunately, this price estimate can be misleading and has a wide margin of error according to Realtors, other sites, and even Zillow. This might cause you to wonder why Zillow would continue to post the Zestimate® and what is useful for if it cannot be trusted to accurately represent the value of a home.
Zillow shares this disclaimer about its home valuation tool on its website: “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.”
How is the Zestimate® Calculated?
To reach an estimated value of a home, Zestimate® takes into account the following:
- Publicly Available Home Characteristics: includes basic data like square footage and the total number of bedrooms and bathrooms. If a home is not currently on the market, the available information from the last time the home was listed is used.
- On-Market Data: culled from active listings, including listing price, number of days on the market, and comparable recent sales in the area.
- Off-Market Data: comes from other sources like prior sales and tax records. This is why you might find your home on Zillow’s website even if it is not currently on the market.
Are Portland, Oregon Zestimates® Accurate in 2023?
Zillow states the Zestimate® in the Portland area falls within a 1.82% error rate for current active listings. The same page says the Zestimates® are within 5% of the sales price 84.98% of the time. These seem like pretty impressive statistics. Mark Twain famously quoted, “There are three kinds of lies: lies, damned lies, and statistics.”
If you scan farther down in Zillow’s published data you will find the statistics for off-market homes, which are much worse. The error rate for the Portland area is a dismal 5.74%. Even more surprisingly, only 44.48% of Zestimates® fell within 5% of the sale price. What is the reason for this discrepancy? Taking all factors into consideration, Zillow is simply making an educated guess based on limited data including location, square footage, and the average lot size in a given area to estimate a home’s value. Its formula overlooks upgrades, the condition of the interior, and other factors that can easily be missed when you can’t see inside the home. As I’ve heard some fellow Realtors say, “the Zestimate is blind.”
Let’s face it, if Zillow is off by 5.74% in Portland, Oregon with an average price point of $500,000, that means their off by an average of $28,700 – which means they can get close to the ballpark, but won’t make it to first base.
The other reason for these contradictory outcomes is that the information Zillow uses for active listings is updated when a real estate agent lists and prices a home based on their own professional expertise. Incredibly, the high accuracy rate for active homes is based on information provided by a Realtor, not Zillow’s own estimates. These estimates are based on borrowed information from a reliable resource – the real estate agent. When Zillow relies on its own information, the margin of error is much higher.
The Zestimate® is Not the Best Resource for Selling Your Home
Zillow is a for-profit business concerned with its bottom line. The more people visit the site, the more money the company makes. The Zestimate® is designed to continue to attract people to visit the website: homeowners may want to find out what their home might be worth and homebuyers may want to know if they are getting a good deal on a house. The Zestimate® is a quick way to satisfy these general questions. But in fact, Zillow had to shutter its own home buying program, Zillow Offers, largely because its algorithm was unable to accurately forecast home prices. They based a business model off their own Zestimate® and failed spectacularly.
Are There Better Options for Estimating the Value of Your Home?
Here’s our article on the top 4 websites for free online home value estimates. In this article we break down the pros and cons of four popular online home value estimators. We also have a better online home value estimator for you. It is free of charge and only requires your email and your address to work.
The Best Way to Get an Accurate Home Assessment: Work with an Experienced Realtor
State-licensed Realtors put their clients’ needs first; it is part of their fiduciary duty. The benefits of this client-centered mindset combined with the valuable experience gained from selling homes and a thorough knowledge of the Portland area easily outweigh that of a large corporation that puts profits first. Always seek out a local experienced Realtor during your home selling journey with the assurance that they will keep your best interests in mind.
If you are considering selling a home in the next twelve months, reach out to our top 1% sellers agents. We offer a 4% maximum commission to sell a home in the Portland metro and have completed over 2,000 local home sales. Get started by chatting with the bot on our site, or give us a call at 503-714-1111 today!May 19, 2023