Zestimate dropped dramatically after rental purchase
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Realtor · Akron, OH · Member since 2023 · 56 posts · 40 votes
2yI would guess the Zestimate is a direct correlation to the price you just bought it for.
39 Replies
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @John Morgan:
@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.
which is good, so if your zestimate is lower than neighbour zestimate, then you're buying discounted property, that's what we want.
- Member since 2019 · 7k+ posts · 4k+ votes2y
that above is the sample of Zestimate surprise because a 20 mil house is valued at 40 mil by Zestimate becoz the agent is selling 20mil FMV house at 40mi.
If every realtor in the area conspire to raise their client's house value , unsuspecting buyer would think there's huge demand that raise the price
while it's actually nothing LOL - 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesYes. And I don’t go by zestimates or care about them.I’m a buy n hold investor and never plan to sell. But some people want to sell within a few years after purchase and don’t like seeing their zestimate 50k or whatever lower than all the homes in the area that are the same size. If they try to sell to someone off market, it looks like their home is barely worth anything according to Zillow. lol
Quote from @Carlos Ptriawan:
Quote from @John Morgan:
@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.
which is good, so if your zestimate is lower than neighbour zestimate, then you're buying discounted property, that's what we want.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Sol Naim:
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.
You don't understand or comprehend how a zestimate work's or get's to it's price, indicating a significant deficiency in appraisal knowledge.
Than state you made a half-million dollar purchase using you're own appraisal, as in you appraised it, the person with total deficiency for such.
And all this while seemingly inferring you leaned on or used in whole, zestimate for your appraisal, or at least for your appraisal confirmation.
This is the definition of a setup for failure.
Having an appraisal done has no bearing on if the purchase is financed with cash, financing or Chuckie-Cheese vouchers, ALWAYS know the #'s. Unless you yourself are an appraiser or were one it's insanity to do a purchase with NO appraisal.
I am a Broker, I have done thousands of CMA's and countless BPO's and I still wouldn't dare doing a purchase blind with no appraisal UNLESS it's so insanely discounted that there is a no-brainer Grand-Canyon sized equity on it and that ONLY comes via some matching massive sized issue to do with the buy, like it's an estate and heir's want nothing to do with the floor to ceiling green shag carpeting or ceiling mounted disco ball in master-bedroom and just want quick easy simple cash (yes, I have seen this, floor to ceiling green shag, yes, across the walls! Disco ball in master bed, and yes, it was as ugly as it sound's)
Zestimate is NOT an appraisal. There is a reason why there is disclosures all over saying DON'T use it as an appraisal, it's not meant for such and the ai that run's it is OFTEN not accurate often way WAY off.
So saying you bought blind, no appraisal until after reno! That's double blind. How do you even know what your reno budget can be? If you don't know your exit you can't know reno budget. If you don't know appraisal you can't know exit.
And 6 month's comp's is far too long. You need to know the 30/90 day. What the market VECOTRING is. Than project that out to peg your FMV at time of offering. If market vectoring is down at 1.3% MOM and your estimated hold time is 6 month's, do you know what that means?
This post is the recipe for how to make a flip a flop.
I hope lady-luck is favoring you to save from probability of learning this lesson the expensive way.
- Investor · FL · Member since 2023 · 33 posts · 10 votes2y
Zillow estimates are always wildly off from true property value. Sometimes I would just average out comps sold in the last 3 months to get a good idea of a better valuation.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Cameron Ward:
Zillow estimates are always wildly off from true property value. Sometimes I would just average out comps sold in the last 3 months to get a good idea of a better valuation.
most important thing from zestimate is actually the range, and the range itself is actually 4 standard deviation.
zestimate is actually more similar to an painting auction price, as painting we dont know the intrinsic value of an art.
But it's being modeled by how the buyer willing to buy such "art".
Even doing comp itself is sometimes vague because like I say, comps high and comps low has three to four standard deviation, in a one million home, the range could be from $850k to $1.3mil.and to make even thing more complicated even the same house that was sold for X price in March, same house could go to 0.98x by December due to seasonality aspect of neighborhood and supply-demand dynamics.
From statistical perspective, zEstimate is good when there're lot of similar comps in the neighborhood with condensed price pattern (for example, if neighborhood price is ranging from 200k-250k ; but it would be all over the place if home price is too low or too high).
Even professional desktop appraisl would face similar problem as well, so I would not blame Zillow/zEstimate. this is merely statistical issue.
So you still need professional appraisal.
But again if you ask three different appraisar, they would come with three different opinions LOL , it's the reality. - Miami, FL · Member since 2022 · 60 posts · 39 votes2y
The purpose of the zestimate was to get everyone to check how much their own house was worth in the eyes of Zillow. It was never about accuracy - it was just a way to stir up controversy and make people get into the habit of using Zillow (and it worked perfectly). It's very difficult to make an algorithm that can accurately define how much a property is worth en masse.
- Realtor · MO (missouri) · Member since 2018 · 4 posts · 5 votes2y
@Sol Naim
Whatever you do don’t rely on Zillow numbers. Zillow reacts to listing events. If you list a house higher or lower than the zestimate, you often see the zestimate change to the listing price. Same thing when you sell.
Look at some of the Zillow zestimates for 6 month time periods and look at where the houses were listed and you’ll see the zestimate moving all over the place. They drop the house price, the zestimate drops. Values of houses generally don’t change $100,000 overnight unless there’s a catastrophic event like a fire or a tornado or a zestimate.
If you want an accurate picture of your house value, use the same parameters the appraisers use. Look at similar houses in a one mile radius that sold in the last 6 months. You can adjust the value using the $$$ per sq ft on the house. Comparable houses should be within 10-20% of the house square footage. Remember to comp one story houses against one story houses and 2 story houses against 2 story houses. There usually is a significant price difference in these 2 types of houses.
Zestimate or Redfin or realtor.com value is a good quick look at a property value, but there’s no way I would ever rely on what it says. I always do the homework and look at the actual sales. You need 6 good comparable sales for a good appraisal value
- Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes2y
@Sol Naim Congrats on the new purchase! Is it in Louisiana or Los Angeles :-D Doesn't matter...
Zillow Zestimate is a computer generated home pricing algorithm that uses many data points to come up with a price for the property. SFR are valued based on comps, but Zillow is not yet sophisticated enough to do this with absolute precision. For instance, it doesn't always account for the condition and aesthetics of a property.
One of the strongest signals that Zillow uses for Zestimate is pending sales prices, or recently sold price for a given property. In SFR, a home is worth whatever someone paid for it. If you bought the property significantly under market then your Zestimate is going to reflect that as it is an accurate reflection of what the home is worth. Regarding your equity, the estimate may be accurate. Why did you get it so far below market? Is there renovations that need to be done?
At the end of the day though a Zestimate just points to the value of the property. If your property appraised for what you need it to, I wouldn't put too much stock in it. The Zestimate will likely just be lower than the neighborhood values until you list again, and then it may be higher (if you renovate and then list for top of market).
Best of luck!
- Member since 2019 · 7k+ posts · 4k+ votes2y
Yes this is why the range is more important than the zEstimate.
I used to create an algorithm for my own zEstimate and what I found is, during certain cyclical/seasnality. The home in certain area would rise if there're few recent home buyers that overbid the market, with just 3 comps the entire neighborhood could rise a lot, but that also pose a danger to the market because when interest rate is rising, the demand is slowly reduced. So that 3 comps is artificially inflated the market,sometimes unnecessarily.
The one that's really driving up the price is really inventory these days and/or the DOM. I would pay attention to these DOM's data out of Redfin market insight than anything else. - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Liam Maher:
The purpose of the zestimate was to get everyone to check how much their own house was worth in the eyes of Zillow. It was never about accuracy - it was just a way to stir up controversy and make people get into the habit of using Zillow (and it worked perfectly). It's very difficult to make an algorithm that can accurately define how much a property is worth en masse.
100%. Zestimate is one of the best marketing ploy's in history, nothing more. So good in fact that persons now have delusion of it replacing appraisals.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @James Hamling:
Quote from @Liam Maher:
The purpose of the zestimate was to get everyone to check how much their own house was worth in the eyes of Zillow. It was never about accuracy - it was just a way to stir up controversy and make people get into the habit of using Zillow (and it worked perfectly). It's very difficult to make an algorithm that can accurately define how much a property is worth en masse.
100%. Zestimate is one of the best marketing ploy's in history, nothing more. So good in fact that persons now have delusion of it replacing appraisals.
zEstimate is truly volatility-inducing feature introduced by Zillow, but this is good marketing to give 'euphoria' to buyers and seller, I still use it day and night to give quick glance whether an asset is relatively cheap or expensive before even placing a bid LOL
Thru zEstimate I would now if a flip home would be good to buy to consider or it's relatively more expensive than the neighbour. I would say zEstimate is really useful tool for broken home so they can tell the buyer hey your house is worthed 700k although with condition actually it's worthed only of 599k only LOL
- 2yNate MeekerBusiness MemberReal Estate CPA | California · Member since 2020 · 543 posts · 251 votes
@Sol Naim - zillow estimates and tax assessed values hardly mean anything. One man's trash is another man's treasure. Always rely on your own comps and the professional ones provided, never an auto generated one. AI is far from taking over.
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