Zillow’s Zestimate Is Frequently Wrong in Northern Virginia; Unhelpful to Buyers, Sellers & Renters

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Zillow’s Inaccuracy Frustrates Consumers & Company CEO

So much so that Zillow has been accused of misleading and irresponsible home price estimates that have hurt both home buyers and sellers. Certain complaints have risen to the level of class-action lawsuits filed against Zillow in federal court. These court briefs outline that Zillow’s Zestimates are consistently inaccurate by anywhere from 6% to 50%. In fact, in 2017 Zillow’s CEO, Spencer Rascoff, sold his home in Seattle’s Madison Park neighborhood for $1.05 million – 40% below his own Zillow Zestimate of $1.75 million. A 40% delta is not an estimate miss, it’s an outright failure. Even worse, Seattle is the location of Zillow’s headquarters – a market where its algorithm was built and should be the most accurate.

Why is Zillow Zestimate so Inaccurate?

Zillow claims its Zestimate incorporates public and user-submitted data, taking into account home facts, location and market conditions. However, the tool was actually developed with less in mind about calculating accurate estimates of home value. Instead, it was more about teasing users to use the website to create hits. Zillow’s co-founder and executive chairman Rich Barton said, “We created Zestimate to be very provocative and personal and a little voyeuristic”. I’m a professional real estate agent who performs home value estimates every day. What are the problems with Zillow’s Zestimate from my perspective?

  1. Zestimate values are not hyper-local like all real estate values, nor does it factor home condition into its estimates. Zillow doesn’t physically tour and inspect the homes to estimate value like a Realtor or Appraiser.
  2. Zillow doesn’t know anything about your home’s updates and improvements, nor the condition of high-value areas like the kitchen, bathrooms and master bedroom. Zillow doesn’t know the home’s specific features, characteristics, finishes and how they may be valued against selling price comp to selling price comp.
  3. Zillow doesn’t know the specific sub-market and neighborhood where your home is located. They have no understanding of days on market and how many buyers and sellers there are in the home’s sub-market at any one time as calculated by absorption rate analysis. Zillow doesn’t know the level of market intensity and conviction in the current buying and selling activity.
  4. Zillow doesn’t analyze seasonal effects and how that impacts value at any one point during the year.
  5. Zillow doesn’t evaluate the incidence and amount of seller subsidies (concessions) in the particular sub-market, or how home condition might prevent or encourage the probability of a seller concession and impact value.
  6. Zillow’s Zestimate lacks seriousness and is tied to an unhelpful, large price range of 20%. This can produce price swings of $120,000 based on the average home’s selling price in Northern Virginia. That’s of no help to buyers and sellers who want to precisely pinpoint value.

Examples of Zillow’s Inaccuracy in the NoVa Market

I have first-hand experience with Zillow’s inaccuracy on a regular basis. Here are (3) recent examples in just the last few months.

  1. In May, I represented a seller in Centreville. Zillow’s Zestimate valued my seller’s home at $348,000 with a range of $315,000 to $370,000. We listed the home at $373,000 and it sold for $380,000. Zillow under-estimated the value of this home by $32,000.
  2. In July, I represented a family in search of a home to purchase in the WT Woodson High School pyramid of Annandale. My clients submitted an offer on a home, which they subsequently won seller acceptance and purchased. Zestimate valued the home at $795,000 with a range from $750,000 to $835,000. My buyer purchased the home for $742,500. Zillow over-estimated the value of this home by $52,500.
  3. As I now write this Blog article, I’m working with one of my multi-family apartment building owners. He owns an apartment building in North Arlington with (9) 1BR units. We are in the process of marketing one apartment for rent. Zestimate values the market rent of this apartment at $1,750/mo with a range of $1,500 to $2,200. However, fair market rent is $1,350. Even more evidence of Zillow’s inaccuracy, its algorithm has no market memory. We routinely rent apartments in this building. Zillow should be collecting and cataloging the data to strengthen its algorithm for future estimates. However, every time an apartment comes up for rent in my client’s building Zillow defaults to the same incorrect $1,750/mo over-estimating market value by 30%.

Conclusion: Ask an Experienced Realtor to Estimate Value

Zillow’s Zestimate of home value is frequently misleading and unhelpful to consumers. An experienced real estate agent with local knowledge who has surveyed the home and performed a Comparative Market Analysis (CMA) is best positioned to provide an accurate estimate of value. I use multiple valuation techniques and provide a high-quality written report showing you exactly how I arrived at the estimated value.

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