November 5, 2010

How Accurate is Zillow?

Trent at The Simple Dollar said recently that he thought Zillow as "almost useless" for getting accurate values of houses.   I don't think Zillow is "almost useless" but I don't think its perfect either.

A couple years ago I wrote about Using to estimate home value  I said then: "Use Zillow for ballpark estimates on your home but keep in mind the accuracy isn't always that high. Pay attention to the value range to see what the range of values is estimated at."

Zestimate number versus range

When you look up a house on Zillow it will quote you a Zestimate number for the property value estimate.   For example right now my own house has a Zestimate value of $202,500.   The "value range" however is indicated at $168k - $209k.   So they are estimating that the value is $202.5 but they say the range could be between $168k and $209k.    Don't take the Zestimate number as some sort of gospel.  Zillow has a range stated for a reason.  You should be looking at the value range to give you a more accurate picture of the value.

Zillow's own accuracy calculations

Zillow publishes data on the accurasy of their figures.  They have a Data Coverage and Zestimate Accuracy page.

Nationally the Zestimate accuracy compared to actual sale prices are :

Within 5% of sale price = 26%
within 10% of sale price = 46%
within 20% of sale price = 70%
Median error = 11.1%

The key figure I'd look at the Zestimate is for 70% of homes are within 20% of the sale value.   So for most homes in the nation the Zestimate is accurate +/- 20%. Still that leaves 30% of homes where the Zestimate is 20% more or less than the sale price.  

Individual cities vary a lot too.

The percent of homes that had a Zestimate within 20% of the sale price for some markets:
Atlanta = 58%
Boston = 80%
Denver = 79%
Detroit = 58%
Houston = 71%
Los Angeles = 80%
Miami = 53%
New York = 68%
Seattle = 78%
D.C. = 78%

As you can see the Zestimate in some markets are considerably more accurate than other cities.

Why Zillow isn't perfect

The data that Zillow uses is the public information on your home and it may not be perfect to begin with.  For example, Zillow thinks my house is 112 sq ft smaller than my last appraisal indicates.   That 112 sq ft matters.  A similar house in my neighborhood that is the same actual size as mine has a Zestimate that is about $10k more than my home's Zestimate.

The Zestimate is simply based on things like square footage, lot size and number of bedrooms and bathrooms.  Zillow doesn't know if your kitchen was remodeled this year or still has lime green 1970's countertops.   Zillow doesn't know if your front yard is a weed patch or if it is professionally landscaped and neatly manicured.   These things certainly matter in the sale value of a home, but from Zillows perspective all homes are treated equally since it doesn't know what condition your interior or exterior are in.

Its not easy to perfectly estimate the value of a home.   Even experienced Realtors can't peg the number perfectly all the time.

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