One of Zillow’s key features is its Zestimates, a popular consumer tool for seeing how much homes are worth. These estimates are based on information from sources such as comparable sales and public data.
Zillow is one of the most popular real estate listing websites. Founded in 2006 by former Microsoft executives Rich Barton and Lloyd Frink, Seattle-based Zillow provides information about millions of homes for sale and rent across the United States and Canada. Users can search for a home in a particular area using different criteria including—but not limited to—prices, number of bedrooms and bathrooms, square footage, type of home and other amenities.
But just how accurate is Zillow’s Zestimate? It’s a question we get asked weekly from buyers and sellers.
And the truth is while there’s a lot that goes into the Zestimate, a comparable market analysis is still needed. Zillow gets their estimate mainly by price per square footage in the neighborhood or general area. And for cookie cutter neighborhoods of similar sized homes their estimate is usually pretty close.
But when a property is unique, for example has additional features compared to its neighbors or a unique lot, often the Zestimate is very far off from market value. In this situation you have to ‘adjust’ for things like condition, lot, etc. which Zillow does not do.
Here’s a great, real life example.
This past weekend, a potential seller contacted us asking for a price evaluation. The home had a Zestimate of $529,000. And at first glance comparable home sales in the neighborhood were low $500Ks. So Zillow’s Zestimate sounds accurate, right? Well not really. Zillow did not account for the home’s lot.
Two homes in the neighborhood are waterfront (on a river) and sold for $500,000 and $575,000 thus significantly raising the average price in the neighborhood. However, the seller’s property is not waterfront.
To perform an accurate analysis, we removed the waterfront lots and focused on the non-water front homes. These homes sold for an average of about $429,000. After adjusting for square footage and upgrades, we determined the value of the seller’s property closer to $450,000.
In this case, Zillow did not have complete lot info and valued the home nearly $80,000 more than the property’s true market value!
So what’s the harm?
Home sellers who “anchor” on inaccurately high estimates will overprice their homes for sale and then it’s emotionally hard for them to lower the price.
Home listings that start out way overpriced can languish unsold and end up selling for less than if they were priced more accurately when they first hit the market. This time period is crucial. Buyer interest in a home is by far the highest when the home first hits the market so it’s critical to get the price right.
This is another reason why it’s so important to have a qualified realtor viewing the home in person to accurately value it by analyzing the correct comparable homes and sales in the neighborhood vs. relying solely on Zillow’s Zestimate.
If you are looking to buy or sell in the Northern Virginia area, this is a great time! Please give our team a call! We would love to help you find your dream home or sell your current one!
Jennifer Young Homes Team | Keller Williams Realty | 703-651-5655