It’s a proven fact that the majority of homebuyers start their home search online. One of the more well-known sites for home information is Zillow. Zillow provides a range of tools for homebuyers, including Zestimates, which are Zillow’s best estimate of a home’s value. Should you make decisions based on a Zestimate? Here are the things to consider.
How Zillow Calculates an Estimate of a Home’s Value
Zillow uses an automated system to prepare estimates for over 100 million home in the U.S. Given the sheer volume of estimates it tracks, Zillow must use a calculation based on a range of publically available information that results in an average price.
Data sources used for the estimate include MLS home listings, county tax records, and recent sales in the target home’s area.
How Accurate are Zillow Zestimates?
Zillow is open about the accuracy of its Zestimates. For example, Zillow explains that half the home values are within 5.4 percent of the selling price, and half are off by more than 5.4 percent. That means that half of the $200,000 homes on the site could be valued at roughly $190,000 on the low side or $210,800 on the high side.
Let’s say that the half that are off by more than 5.4 percent are actually off by 10 percent. In that case, the $200,000 home could be valued at $180,000 on the low side or $220,000 on the high side.
Why are the Estimates Inaccurate so Often?
There are many reasons why the estimate could be inaccurate:
- The estimate may be based on the wrong “comparables.” One indicator of value is how a home compares to similar homes that have sold in the area. The system doesn’t know enough not to compare an established home to new construction in the area. In addition, homes a mile away may seem to be comparable, but may be in an entirely different neighborhood with different home values.
- The estimate may be based on county averages. In most areas, homes in various parts of one county vary tremendously, not to mention between counties.
- The estimate doesn’t know when publically available data is wrong. Errors are inevitable. There can be inaccurate information on MLS listings or tax records.
- The estimate doesn’t know if you’ve just updated your kitchen. It also doesn’t know if your roof is about to cave in. Some features of your home will significantly affect its value.
How Can Zestimates Cause Problems?
The biggest problem is that homebuyers and sellers tend to take the estimates they see on Zillow and other real estate websites as fact. They don’t know about information like this and Zillow doesn’t make it easy to find.
Homebuyers may plan on making a ridiculously low offer on a home, and home sellers may plan to set an unrealistically high listing price for their home. Then, when a professional real estate agent gets involved, the homebuyers and sellers are often presented with conflicting information.
Real estate agents are very familiar with Davie FL homes for sale, the neighborhoods in the area and the real estate market. The comparative market analyses they prepare take many factors into account that the automated systems don’t.
What’s a Consumer To Do?
The advice I give to my clients is that they can use websites like Zillow to see lots of information, but that they need to take estimated home values as a very broad guideline. They need to realize that the home value estimates are most likely off by tens of thousands of dollars.
In addition, I recommend that clients use a home search that comes right from our local MLS, like this one. Searching the MLS gives you the most accurate information available, and you can simplify your search by setting up your own search account.
Using this account, you can save homes you like as favorites, and get emails as soon as homes that meet your criteria hit the market. You can also save searches so you don’t need to select your criteria every time you visit the site.
If you have questions about buying or selling home in the Davie FL area, the experts on the Teri Arbogast Team can help. Call us at 954-242-8030 or send an email!