A recent article in the Appraisal Journal Winter 2010 issue features a study that shows that Zillow Zestimate values are no more accurate than the homeowners’ estimates. The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest association of real estate appraisers.
“Zillow’s Estimates of Single-Family Housing Values,” by Daniel R. Hollas, Ph.D., Ronald C. Rutherford, Ph.D., and Thomas A. Thomson, Ph.D., examines how Zillow’s estimates of value, known as Zestimates, compare to actual sale prices. The study, which was conducted in Arlington, Texas compared the Zestimate prices, the home owner’s opinion of their homes value, and the final selling price. Zillow.com is an automated valuation model Web site. Zestimates use a combination of objective data points that include recent sales, tax records, and average home appreciation factors to come up with a suggested Zestimate. What Zillow can not do is account for the subjective elements that impact a final sale price such as condition of the home, occupancy, and the level of finishes. A kitchen renovation may not have an impact on a Zestimate score but it will impact the opinion of a real estate agent, appraiser, and a buyer!
The authors looked at home sales in Arlington, Texas, a location where Zillow has indicated its data has the highest accuracy level. Still 40% of the Zestimates were more than 10% higher than the sale prices. Independently, other studies have shown that homeowners’ overestimate the values of their homes by 5.1% and new owners
overvalue their homes by about 8.4%. While Zillow can provide a price estimates quickly, their accuracy is certainly suspect. The best way to evaluate your home’s market value is to call a real estate agent and schedule an appointment. an agent with local knowledge will provide you insight on your home compared to the homes currently listed, and that is the most accurate way to find the true market value of your home.