How Good is Zillow's "Zestimate" of Home Value

73 Replies

Originally posted by @Phineas Howie :
Originally posted by @Tristan S.:

@Phineas Howie I have heard that it really depends on your area. Not very reliable here in TX, sometimes it's on point but sometimes it's way off. I wouldn't trust it for getting an ARV.

 Thanks for the advice, so how do you think can one find out how accurate it is in any given area?

I would have a couple real estate agents do a Comparative Market Analysis (CMA) on the property you are looking at. They are free. You can then compare to the properties in your area and see how they stack up.

Bottom line: Zillow's Zestimate is as good as everyone is saying!  Namely, it's not right all of the time and if it's incorrect most of the time (high or low) you have to pull your own comps.  So you can't use it to skip out on any "manual" analysis you'd have to do yourself.  

I think it stands a better chance of being accurate in relatively new suburban subdivisions.  What it can't do is know if the property has been rehabbed.  Even if it could, how could it possibly know and calculate is "rehab" is new carpeting or a down-to-the-studs renovation?  Live near the ocean in California and watch it be unable to determine that literal oceanfront has a lot of value vs. across the street or two blocks away.  In short, my feelings are the more "unique" the area the less accurate the Zestimate.  More bluntly, if Zillow's algorithm lines up identically with an appraisal, well, it's more luck than anything else.  And I really wish it was right...if it was I'd have a lot more equity in my home than I think I do!

And it's useless when it comes to commercial multifamily...

Not exactly free.  They do cost the agents time and effort...

%60 of the time... it works everytime :) lol

Just like beauty is in the eye of the beholder... zestimate is in the eye of the beerholder.... cheers!

Texas is a non-disclosure state so Zillow is definitely not accurate here

Originally posted by @Loren Clive :

Contact your favorite realtor and ask for a complimentary CMA. Zillow is not accurate enough to be relied upon.

I certainly hope this favorite RE agent has received some paid business from you in the past to expect complimentary services from them. If not, that is certainly not a fair way to start a relationship. 

Originally posted by @Jay Groleau :

Of course I'm biased as an appraiser, but it is essentially useless. Sometimes it is right on, and others, way off. You don't necessarily need to get an appraisal on a property, but you need to be able to figure out the  value yourself, or work/partner with someone who can. 

 Jay, I'm going to put you on the spot here as an appraisal, and I hope that you don't mind as you will hopefully see it is for the betterment and education of all ... could you please provide us with some tips and pointers and guidelines for pulling appropriate comps and determining market value from them?

I know that books can and have been written on the subject, and I myself know many of the guidelines, but since I recommend everyone be able to do it and you are in the business I'd figure I'd shoot for the big ask from you. Thanks.

@Phineas Howie ,

How good is a Zestimate? It depends.

How good is the information available to the Zillow website software? The software can only make the best guess the programmer knew how to make based on the info the software can gather from what is available to it.

No - there aren't crews of people analyzing property values, etc. - its the website software making the best guess it can.

Note that it says "Zestimate". That is, "Zillow Estimate".

It does NOT say, "Zappraisal" - "Zillow Appraisal". I doubt that would even be possible.

@Greg H. thanks you made my morning.  

Yeah, here in Texas it is way off.  My property is El Paso has a Zestimate of $290K it realistically would go for $200k tops!  

But thanks everyone for your input and especially Account Closed I am originally from NY myself.  

We have something really similar in the UK, with the website Zoopla.  From my experience it really depends on which city you are in.

In certain parts of London lots of houses have been converted to flats of various sizes and configuration, so there can be quite a discrepancy.

Though I think now they are using the FOR SALE brochures to get Sq footage and other details then use that to update property details so it's getting more accurate.

If you think Zestimates are good for determining market value, you shouldn't be investing in real estate.

@Will Barnard That's an interesting opinion. I am a real estate broker, and I wouldn't hesitate to provide a complimentary CMA to any prospective client, whether or not I've ever done business with them! Any realtor who is unwilling to do this doesn't deserve your business.

Originally posted by @Loren Clive :

@Will Barnard That's an interesting opinion. I am a real estate broker, and I wouldn't hesitate to provide a complimentary CMA to any prospective client, whether or not I've ever done business with them! Any realtor who is unwilling to do this doesn't deserve your business.

 You really believe that ?

I will use myself as an example . Say there is a client out there that wants to buy a HUD property which has very specific guidelines that need to be followed. You can read some of my posts. I have bought hundreds and know the system inside and out. Based on your statement, that "client" would be better served by a phone duty agent who had nothing better to do than do CMAs on their laptop? I could give you a 100 more scenarios. Personally, I want an broker that has the skill set to get the job done and who's time is in demand

Yes. I'm saying an agent who wouldn't give you a complimentary CMA is not worth working with. I'm not sure where you're getting the "desk agent" part or what relevance HUD has? The subject of the post was an estimate of home value, not buying a HUD home.

Of course you're going to qualify the client and decide if it's worth your time. But most agents are looking all day long to talk with homeowners, so what's the big deal? If you are that busy, good for you! Here in Hawaii, we don't have to turn so many deals to make a good income, so I'm pretty generous with my time provided the person owns a home and seems sincere. Plus I am very quick with CMAs, knowing our small market pretty well. 

I do respect your position, but personally if an agent I contacted were so busy they couldn't give me a CMA I would work with someone else.

Originally posted by @Loren Clive :

@Will Barnard That's an interesting opinion. I am a real estate broker, and I wouldn't hesitate to provide a complimentary CMA to any prospective client, whether or not I've ever done business with them! Any realtor who is unwilling to do this doesn't deserve your business.

 You are missing my point. I have run comps for others for free many times too, my point is that attempting to start a relationship off by holding your hand out is not the best approach. Expecting agents to provide free services (or anyone else for that matter) without showing some sort of effort to reciprocate (past business is certainly a good start!) is not my idea of a good business practice.

60% of the time, it's accurate every time. 

As a flipper I don't use Zestimates to determine home values or make offers BUT I don't discount the fact that many of my potential end buyers (who are likely retail buyers) will look at it and if the price I'm offering is way above the Zestimate may balk at the price. I at least would like to be prepared to counter any such considerations with why I feel the Zestimate is not an accurate reflection of what my particular property should be worth.

@Phineas Howie One word, Terrible. Just don't. I can't say anything else than, get access to MLS somehow.

@David Faulkner

Sorry for the delay in getting back to you!

Pulling comps is about the most important thing we do when it comes to single-family homes, or individual condo units. Other approaches to value are important when dealing with different kinds of properties, but the sales comparison approach is typically the most reliable when appraising a single-family home.

To be honest, the most important things to remember are the common sense things everyone talks about – location, the type of house, quality of construction, age, condition, size, etc. You want sales that are as recent as possible, as proximate to the subject as possible, and with as many similar characteristics as the subject as possible.

When you dealing with a typical single family home, finding sales with common characteristics is relatively easy. It's when you get into a situation where the property you're trying to value is a little unusual whether it's the house itself, the location, if it's in a remote location with there are few sales annually, etc.

When valuing a home that you have an interest in, it's important not to be emotional, and to be realistic about your property, or about an investment you're going to make.

Lastly, what I tell agents who ask me for advice in either pricing a property to put on the market, or to assess the property that has been sitting on the market for too long, is to look for properties that tell you what you are property is NOT worth. Don't just pull sales that you think look like your property. When you have a value in mind, look at comps that sold for that amount, and be objective when comparing your property to those. If you think your property is worth $1,000,000, pull comps that sold for that amount and ask yourself "is my property as good (nice, large, great location, etc) as those?"

Please forgive any grammar mistakes - I am using voice recognition software which doesn't always recognize my voice.

Thanks! 

@Phineas Howie

Zestimates are only as good as how much data is in the area. There's usually not as much data on Multifamily and thus they aren't very good for that. 

Single Family Homes are a little bit better but still not that great because they can't reasonably take condition into consideration. 

I look at it as a data point with about 20-30% margin of error. Which is too much if you are trying to count on anything. 

It depends on whether the state is non-disclosure, or a full-disclosure state. In Montana, we are non-disclosure, which makes Zillow worthless, and laughable. You can hover over certain areas in my state and see property worth $2 million, sitting next to a comparable property worth $200k. How that is useful to an investor is beyond me... I use Realist Tax software to get an accurate evaluation.

Non-disclosure states do not describe the property's value in terms of what was paid for it, but what the jurisdiction thinks it is worth in tax dollars. 

For what it is, it's a generic folklore estimate that's fun to look at. However, it can't be taken seriously by investors since it is grossly inaccurate, even more on non-single families.

For my multifamilies in the Boston area, it is off by over 50%.

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