Zestimate dropped dramatically after rental purchase

Member since 2023 · 20 posts · 6 votes

Hey BP team. Have a question for you guys. I just recently closed on a rental property in LA where the zestimate was 660K (it sold for 640K last year in June) I managed to get the purchase price of 516K which I'm excited about as I'll have over 100K in equity however once we closed and it went into pending the zestimate on Zillow suddenly dropped to 535K! Do you think thats an accurate reflection? It was an off market sale and the house doesn't need much rehab at all! Just some mold remediation. Love to hear your input. Thank you!

2 Reply

268 views

Most Popular Reply

Brian Jackson

Realtor · Akron, OH · Member since 2023 · 56 posts · 40 votes

I would guess the Zestimate is a direct correlation to the price you just bought it for.

10 Reply

See this reply in the discussion

39 Replies

Jump to latestLatest

Sort by

Philip Marzen
Member since 2023 · 3 posts · 6 votes
2y
As a Realtor I advise all my clients to ignore the Zestimate. It is not calculated in an accurate way and can be extremely high or low at times. The reason for the drop was most likely because you got a deal on it. Zillow estimates are based simply on averages in the area, so if you get a great deal you bring down the average.
6 Reply
Tony AcreeBusiness Member
Real Estate Agent · Oakland County, MI · Member since 2022 · 18 posts · 19 votes
2y
I don't put too much trust in the Zestimate. As an agent, clients often reference the Zestimate whether they are buying or selling. I am frequently providing evidence to the contrary with simple comps.
You can do a better job of providing a value by just looking at the SOLD comparables in the area.
[email protected]248-872-2068
Tony Acree - Real Estate One 512 Reviews
Website View Page
3 Reply
Brian Jackson
Realtor · Akron, OH · Member since 2023 · 56 posts · 40 votes
2y
I would guess the Zestimate is a direct correlation to the price you just bought it for.
10 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
2y
You just proved what the”market value: was. You are correct, the previous zestimste was too high. Unless you paid cash I assume you paid for a professional appraisal. What did they say it was worth?
4 Reply
Jake AndronicoBusiness Member
Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
2y
@Sol Naim
Zillow is fairly straightforward with the Zestimate's accuracy. It varies from state to state and area to area pretty drastically.
https://www.zillow.com/z/zestimate/
It's generally in the ballpark, but sometimes way off.
If you want to be more certain, you can sort in Zillow you can see sold comps right next to what you just picked up, and then get more granular to see similar sq ft., lot size, condition, when it sold, bed/bath etc.
Your purchase was a comp that went into their data feed (they collect a ton of data from the county recorder)
Hope this helps, and congrats on your buy!!
415-233-1796
3 Reply
Zachary Ware
Member since 2022 · 405 posts · 455 votes
2y
I would place more wait in a license appraisal, assuming you got one during the purchase and pulling at your own comps. As others have said, Zestimate can vary greatly and is not always accurate.
1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Sol Naim:

Hey BP team. Have a question for you guys. I just recently closed on a rental property in LA where the zestimate was 660K (it sold for 640K last year in June) I managed to get the purchase price of 516K which I'm excited about as I'll have over 100K in equity however once we closed and it went into pending the zestimate on Zillow suddenly dropped to 535K! Do you think thats an accurate reflection? It was an off market sale and the house doesn't need much rehab at all! Just some mold remediation. Love to hear your input. Thank you!

Who cares about zestimate. Its worthless and never used to evaluate pricing.
7e investments53 Reviews
Website View Page
5 Reply
Sunil Kurian
Investor · Bucks County, PA · Member since 2020 · 41 posts · 52 votes
2y
@Sol Naim
As others have noted, this is probably because the zillow algorithm has just done an intake of your purchase price. If we are to assume that your purchase is the most recent in the local area...I'm sure the algorithm is also weighing it more than older comps.
Don't worry though. Zestimate is just a ballpark estimate. Assuming you refi your property after the rehab, a certified appraiser will give you a more exact representation of value. Wishing you luck that it is as high as you hope!
1 Reply
Sol Naim
OP
Member since 2023 · 20 posts · 6 votes
2y
Quote from @Chris Seveney:

Quote from @Sol Naim:

Hey BP team. Have a question for you guys. I just recently closed on a rental property in LA where the zestimate was 660K (it sold for 640K last year in June) I managed to get the purchase price of 516K which I'm excited about as I'll have over 100K in equity however once we closed and it went into pending the zestimate on Zillow suddenly dropped to 535K! Do you think thats an accurate reflection? It was an off market sale and the house doesn't need much rehab at all! Just some mold remediation. Love to hear your input. Thank you!

Who cares about zestimate. Its worthless and never used to evaluate pricing.

Thank you for all your responses. This is helpful. It was just jarring to see it drop over 100K.
I was able to get the rehab costs as a reduction to the purchase price. Would it be better to keep the purchase price higher and get the reduction in the form of a credit? So on paper the price is higher but my purchase price remains the same?
0 Reply
Roger Flot
Investor · Mississippi Gulf Coast · Member since 2019 · 55 posts · 53 votes
2y

I was able to get the rehab costs as a reduction to the purchase price. Would it be better to keep the purchase price higher and get the reduction in the form of a credit? So on paper the price is higher but my purchase price remains the same?
If you are referring to seller credits, you have to be careful with that because based on the type of financing, these may be limited no matter what the seller is willing to offer. (I think)

Its ok to buy at a low price and then resell higher. The true worth is spelled out in the appraisal and that is a moving target and subjective to many things you can and cannot control. I see no value in purchasing at a higher price. Buy low - sell high.
1 Reply
Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
2y
@Sol Naim the true value of a home is what you can sell it for. But without actually selling it, how do you know for sure? If you got financing, they would order an appraisal that would be based on comps. And most real estate agents are good enough to run a comp report for you (sometimes called a CMA). You could also order your own appraisal if you really wanted to.
1 Reply
Justin Brin
Investor · Los Angeles, CA · Member since 2023 · 165 posts · 65 votes
2y
@Sol Naim zestimate is not accurate. Usually they also give you a range of value. What range it gives you?
What I will do is search Zillow for recent sold houses in your area that are similar to your property. Try to match to properties that are in similar condition to your property and calculate the median. That will be closer to your property value.
Since zestimate is an automated algorithm it has to guess some factors and sometimes it misses. Maybe since you got a deal on the house it’s assuming it’s in bad condition and is matching it with lower house values.

Doing your own search can give you a more accurate results then an automated algorithm.

2 Reply
Sol Naim
OP
Member since 2023 · 20 posts · 6 votes
2y
Quote from @Bill B.:

You just proved what the”market value: was. You are correct, the previous zestimste was too high. Unless you paid cash I assume you paid for a professional appraisal. What did they say it was worth?
I paid cash so didn’t get appraisal
0 Reply
Justin Brin
Investor · Los Angeles, CA · Member since 2023 · 165 posts · 65 votes
2y
Another issue with automated algorithms is that they have limited data on the house. A house can be in a great area but if the block the house is in doesn’t look good then the house value will go down since it’s less desirable but Zillow will never know about it only someone that goes there in person will know.
On the other side if the area is not so good but the house is in a nice block with nice houses the value of the house will be higher even if in both cases the subject house is the same condition.
0 Reply
David Dachtera
Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
2y
Important to remember: It says "Z-ESTIMATE", not "Z-appraisal". Software is making the best guess it can based on the available data - no human is involved.
You may have paid "cash" "off-market". However, as soon as anything is recorded or published which indicates a more recent purchase price, that change in the data will effect the outcome of the calculations.
Hope this helps ...
1 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
2y
Quote from @Sol Naim:

Quote from @Bill B.:

You just proved what the”market value: was. You are correct, the previous zestimste was too high. Unless you paid cash I assume you paid for a professional appraisal. What did they say it was worth?
I paid cash so didn’t get appraisal

... lol.... I can't properly put into text my eye-rolling, head shaking, belly laugh with simultaneous cringe at this.
0 Reply
Sol Naim
OP
Member since 2023 · 20 posts · 6 votes
2y
Care to explain? I’ll be getting the appraisal after I finish the rehab. I comped it at 630K from sales in the past 6 months with the same buy box.
0 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2y
You should sell immediately. Make the contract contingent upon being linked to the "Zestimate" price. Whatever the "Zestimate" is on the day of closing, that's the price!
0 Reply
Justin BrickmanBusiness Member
Realtor · San Antonio, TX · Member since 2021 · 502 posts · 274 votes
2y
It’s Zillow’s world we’re just living in it
[email protected]210-827-6020
Justin Brickman Realty4.9144 Reviews
Website View Page
0 Reply
Sol Naim
OP
Member since 2023 · 20 posts · 6 votes
2y
Quote from @Steve K.:

You should sell immediately. Make the contract contingent upon being linked to the "Zestimate" price. Whatever the "Zestimate" is on the day of closing, that's the price!
??
0 Reply
Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2y
Quote from @Sol Naim:

Quote from @Steve K.:

You should sell immediately. Make the contract contingent upon being linked to the "Zestimate" price. Whatever the "Zestimate" is on the day of closing, that's the price!
??
Sorry, sarcasm doesn’t come through on the internet. You should ignore the zestimate, it’s only a rough ballpark at best, sometimes off by six figures. Use actual comps or an appraisal to estimate actual fair market value.
2 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Sol Naim:

Hey BP team. Have a question for you guys. I just recently closed on a rental property in LA where the zestimate was 660K (it sold for 640K last year in June) I managed to get the purchase price of 516K which I'm excited about as I'll have over 100K in equity however once we closed and it went into pending the zestimate on Zillow suddenly dropped to 535K! Do you think thats an accurate reflection? It was an off market sale and the house doesn't need much rehab at all! Just some mold remediation. Love to hear your input. Thank you!

of course it's accurate, it's your purchase price LOL
they use the listing price and sold price as for zEstimate, dont worry too much, if you listed those property for 2 mil, it would show 2 mil, I have done that LOL
1 Reply
Allan C.
Rental Property Investor · Member since 2018 · 826 posts · 810 votes
2y
@Carlos Ptriawan I always chuckle when I see agents list $200k above FMV and then drop the price a few days later in an attempt to create perceived value for noob buyers
1 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Allan C.:

@Carlos Ptriawan I always chuckle when I see agents list $200k above FMV and then drop the price a few days later in an attempt to create perceived value for noob buyers
Truth is even comps has more than two or three standard deviation LOL

yesterday I saw house that prev zestinate is showing 20 million , this week zestimate is 38 mil because that seller is selling for whooping 40 mils

whats cool about zestimate is one buyer that outbid above FMV would rise the market value in entire neighborhood, that would increase the bidding process again lol

and vice versa , I would say zestimate is really fueling market volatility
1 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
2y
@Sol Naim
This has happened to me on at least 4 properties I bought off market in the last year or two. I’m thinking Zillow gets the purchase price and lowers it to around that price. Mine stay very low around my purchase price for awhile as other homes in the area seem to appreciate much more.
1 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.