How accurate are Zillow estimates?
I’m constantly asked how accurate are Zillow estimates, known as ‘Zestimates’, and I can’t tell you how many times I’ve heard a seller tell me ‘but Zillow says my home is worth more/less.
For some reason, people have come to treat Zestimates as the defacto standard. Maybe it has something to do with our desire for instant gratification. In today’s internet-obsessed society, we want instant answers.
How accurate are they? Not very. They are better used as a starting point for determining value, not the endpoint.
According to Zillow’s own statistics (https://www.zillow.com/howto/DataCoverageZestimateAccuracyMA.htm), Boston/Suffolk is one of their more accurate areas and they say their accuracy is 5.3% of the sales price.
So, let’s think about that. For a $400,000 condo, 5% is $20,000, which means their Zestimate could be anywhere from $380,000 to $420,000. If you are the seller of that condo, you would see that as a pretty big price difference.
For Boston, Zillow also says 25.6% of their estimates are off by more than 10%. For that same $400,000 condo, 10% is $40,000. So, 25.6% of their estimates would be under $360,000 or over $440,000.
However, sometimes the Zestimates are right on the money. People see the ones that are very accurate and are impressed – ‘Wow, they really got that one right. This tool is pretty good.’ The inaccurate ones are rationalized away – ‘Well, it’s just an automated tool and some of the data it is using is probably incomplete or wrong’.
It’s fun to check the values on Zillow, but just remember it is just a starting point.
The problem with Zestimates and other AVM’s (Automated Valuation Model) is there are too many qualitative data points to consider that are not part of the model, such as:
- Hardwood floors throughout.
- Kitchen remodel you just did.
- The walls you removed to open up the place up.
- The energy efficient appliances you installed.
- The new windows throughout.
and there are a few data points that are more relevant to condos:
- The floor level. On initial sale of a building, the higher the floor, the higher the price. $5,000 – $10,000 per floor is not uncommon.
- The side of the building you are. In some buildings, one side faces a busy street and the other side a quiet courtyard.
- The view. This can be a huge difference maker. In some buildings, one floor you might be looking into a brick wall of another building and the next higher floor has an incredible view of downtown and the monuments.
Because of these numerous, qualitative data points, an automated value model will always be suspect. They are getting better every day, but I’m not sure they will ever get to the same accuracy that a good real estate agent or appraiser can provide.
If you are thinking of selling and need an accurate value of your condo, contact me at email@example.com.
Contact me to set up an appointment to start your Boston condo buying process.
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