Is the Zillow Zestimate® Accurate?

Updated 10/2024.

These days, anyone selling or buying a home is familiar with Zestimate®, Zillow’s tool that estimates property values. People often make decisions about selling or buying homes based on its numbers. They may make a decision to sell their home based on a Zestimate, or decide what to offer to purchase a home based on a Zestimate.

Unfortunately, the Zestimate estimates still have a wide margin of error. This is according to Realtors, other sites, and even Zillow’s own website. Zillow’s disclaimer reads: “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.”

So why does Zillow still use Zestimate if it isn’t accurate? It’s an important question, and we answer it here.

How Does Zillow Make Money?

The best way to know a company’s motivation is to follow the money. Most of Zillow’s business is based on selling advertising on its website and app. With over 300 million monthly visits, it is the most visited real estate website by far. Zillow sells this traffic to industry providers and advertisers in the form of ad clicks and leads.

Zillow’s Zestimate feature was part of the company’s launch in 2006 and has remained an important factor in its growth. By offering users a home value estimate on nearly every property, it allowed homeowners to guess at what their home could be worth, and helped homebuyers see if they might get a good deal.

The Zestimate sounds helpful, but there is another side to that coin. Zillow’s primary business goal is to generate paid advertising revenue, not sell homes. It doesn’t have a strong an incentive to provide accurate home value estimates compared to performance-based Realtors.

Zillow sees Zestimate as a starting point in determining a home’s value, but their starting points leaves a lot of room for error. A Realtor with deep knowledge of a local market, the neighborhood benefits and issues, and a specific property’s condition, all results in a more accurate look at a home’s value, and their career depends on it. Zillow doesn’t carry the same risk.

How a Zestimate is Calculated

A 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 the home in question is not currently on the market, information from the last time it 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: This data comes from other sources, such as 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.

How Accurate are Zillow Zestimates Today?

As Mark Twain famously quoted, “There are three kinds of lies: lies, damned lies, and statistics.”

It’s easy to perceive a Zestimate as an accurate number since Zillow promotes it so clearly; it sits at the top of a listing in a bold, large font. Zillow’s strong brand and massive reach also make the numbers appear trustworthy, but as mentioned before, the accuracy isn’t there.

The best way to understand its accuracy is to look at its numbers vs. actual numbers for a given area. According to Zillow’s most recent data on its website,  “the nationwide median error rate for the Zestimate for on-market homes is 2.4%, while the Zestimate for off-market homes has a median error rate of 7.49%.”

However, when you look at their updated chart in 2024, they are off by as much as 20% in the final sales prices on nearly 20% of homes, or about 1 in 5.

How Zillow Cheats to Make its Zestimate Look Better

Stick with me because this is not easy to explain, but important to understand. As you see above, Zillow’s off the market Zestimates simply can’t be trusted. Anyone with the most basic understanding of today’s home values can get within 20% of the final sales price with a wild guess. For example, in Portland the median sale price is around $500,000. That means the off market Zestimate could be $400,000 or $600,000 and Zillow would still say it was within 20% – that’s a massive ballpark when looking at real estate prices and simply not helpful when pricing a home to buy or sell.

Zillow’s on-market Zestimates look much better. Why? 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’s research, not Zillow’s data. These estimates are based on borrowed information from a reliable resource – the local real estate agent. When Zillow relies on its own information, off market Zestimates, the margin of error very high, so high that no one should use it. Zillow is doing nothing more than looking over its shoulder to see what the smart student in class wrote down for their test answer – then they copy it down and post it online like they are responsible for the work.

Why are Zestimates so Bad?

Here are a few reasons the numbers are so off.

The Data Used is Often Inaccurate

A specific property’s interior condition is impossible for a computer to calculate. It simply can’t see inside. Whether a home is remodeled or not, and to what standard, can swing a home’s value by hundreds of thousands of dollars. The Zestimate is simply blind, it cannot see inside the home.

Also, some property data points available online, don’t actually match the home when a Realtor or appraiser visits in person. In person visits are necessary to verify online property data.

Zillow lost 881 Million Dollars in 2021 Because of Zestimate

Even Zillow themselves learned the reality of their bad numbers the hard way. 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 launched its Zillow Offers program in 2018 to flip homes, adding the company to the growing collection of iBuyers (companies who buy homes online.) However, the program didn’t work due to what they called unpredictability in forecasting home prices. This led Zillow to shutter the program near the end of 2021.

Are There Better Options for Estimating the Value of Your Home?

We created an article on the top 4 websites for free online home value estimates and broke down the pros and cons of each. As a local real estate company, we also know the Oregon and Washington market particularly well and offer a better online home value estimator free of charge. Better yet, we’d love to schedule an appointment to visit your home in person and provide a truly accurate home value and market assessment.

The Best Way to Get an Accurate Home Assessment: Work with an Experienced Realtor

When selling or buying, you will always benefit from using a local, experienced Realtor vs. a large for-profit corporation. State-licensed Realtors put client needs first to grow trust, maintain a strong reputation, and fulfill their fiduciary duties. Since they are also performance-based, they are the best sources for knowing the local area and understanding of a home’s value. A large corporation willing to put out an inaccurate estimates is only putting its profits first, and those profits aren’t related to real estate sales.

Our experience gained from selling and buying homes for over 20 years in the Portland area works to your advantage. We can advise you local nuances and market conditions.

If you are considering selling a home in the next twelve months, reach out to our top 1% sellers agents. We offer a 1.7% commission rate 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. We’d love to connect today!