Photo: Andy Dean Photography (Shutterstock)
If you have failed your path to online real estate listings, dreaming of buying a home with more space and finding a lot that you cannot afford, you are not alone. Finding Zillow has become a pandemic coping strategy for many, although rapidly rising sales prices are likely more likely to add to our anxiety than alleviate it. Nationally, house prices in December increased by 10.4% compared to the previous year.
It’s easy to delve into Zillow’s automated home value estimates – zestimates – when you start your house hunt (real or hypothetical). But zestimates don’t often reflect what a home is actually worth or what it will end up being sold for.
In some markets, like the highly competitive Phoenix, Real estate agents found that the Zestimate model tends to overestimate properties. On the flip side, the zestimate doesn’t matter at all when sellers are selling houses at higher prices and buyers are offering a lot more than that.
What is a zestimate anyway?
The Zestimate is Zillow’s home valuation tool. It uses available data from public records as well as information about the functions of a house to approximate the value. Where available, zestimates are included in property listings.
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Here is what the zestimate takes into account::
- Main features: Square footage, location, number of bedrooms and bathrooms, etc.
- Market data: List price, days on the market, data on comparable properties.
- “Off-market” data: Tax assessments and advance booking prices.
Zillow acknowledges that his estimates are not official evaluations and are within a margin of error. The more data available for an area and a particular property, the more accurate the zestimate.
The mean error rate for houses on the market is 1.9%, which means that only half of all zestimates are within 2% of the selling price. The mean error rate for off-market houses is 7.5%. The margin of error is higher in some markets and lower in others.
The bottom line, however, is that a Zestimate can save thousands or tens of thousands of dollars – and it’s not the same as retail price. This means that whether you are buying or selling, Zillow’s Zestimate should not be viewed as a gospel. Instead, it can be helpful to have a real estate agent who can give you a deeper analysis of your market and determine what is over – and undervalued.