“What is it actually worth?”
That’s the biggest question in any transaction, let alone real estate. While many consumer products have a pretty easy answer to parse—it’s worth the price of materials + labor—home prices are not so easy to determine.
Everything from building materials to the age of the home to school districts to market trends can have an impact on how much a home is worth. Figuring out how all these factors combine into a fair value is no easy task, which is why there is an entire industry of professional appraisers and realtors who work to create fair market prices and get those homes sold at the right price.
Zillow’s Zestimate is a high-tech, algorithmic workaround to that entire industry of professionals. It’s a great idea on paper—why waste time and money scheduling an appraisal when public data on housing trends and property taxes can get you the same end result?
The problem is that the Zestimate tool has created headaches for a number of buyers and sellers around the country.
What is a Zillow Zestimate?
Let’s get one thing out of the way—Zillow does not advertise Zestimates as an appraisal. They specifically state on their website that Zestimates should be used as a “starting point,” and that users should follow up by conducting research of their own, including a professional appraisal.
The Zestimate for a home is calculated using publicly available data including tax data and information from listing services and brokerages. Zillow says they also use information on the home such as square footage, number of bathrooms, and features like hardwood floors and landscaping. All of this data is processed by an algorithm that produces the final Zestimate.
Zillow claims these Zestimates are incredibly accurate in many of the major home markets around the US, with Zestimates accurate within 20% of the final sale price on 99% of homes in Atlanta, Denver, and Charlotte, North Carolina.
So, What’s the Problem with Zestimates?
Like all data-driven assessments, Zestimates are only as accurate as the data you put in. Zillow’s website admits the accuracy of their estimates depend on the amount of data given for the home. The algorithm relies on public records, which can be outdated, especially if the market has taken a dramatic shift or if the tax assessor’s database has a mistake.
While major upgrades like to your home like additional rooms will require permits—and therefore be in the public records—other features like refurbished kitchens won’t immediately be entered into Zillow’s database. Of course, you can input that data yourself on their website listing, but if there isn’t data from similar homes with similar upgrades in your area, it may not actually increase the estimate figure.
Since Zestimates rely so heavily on market data, users in rural areas aren’t nearly as likely to get an accurate estimate as those in large markets. The statistics we mentioned above are from some of the hottest markets in the country, where listing data is flooding in every day. If you’re listing a home in one of the rural communities outside Asheville where fewer homes exist and are for sale less often, the website isn’t likely to give you an accurate estimate.
Inaccurate Estimates Hurt Buyers and Sellers
We mentioned earlier that homes are within 20% of the sale price in 99% of listings. That is a good number in an abstract sense. However, let’s put it another way: if a home sells for $200,000 the Zestimate could be off by $40,000 in either direction, valuing your home at $240,000 or $160,000!
This level of inaccuracy could scare off potential buyers who believe the home you’ve listed is out of their price range. While it’s true that Zillow says their figures are a starting point, potential buyers could see that the “starting” point is $40,000 over budget and move on to the next home to research.
A lawsuit was filed in 2017 by a seller who claimed the repeated undervaluing of her house on Zillow was a “tremendous road block” to selling her home. The homeowner and her lawyer alleged that Zestimates met the definition of appraisals, and said the company should have to get the consent of homeowners before posting them online. The suit was tossed out on numerous appeals, much to the frustration of Barbara Andersen, the filing attorney.
While the courts didn’t find Zestimates to be in violation of any laws, Andersen still maintains that these estimates—whether too high or too low—are a tool buyers and sellers can use to manipulate one another into agreeing to a sale that favors one party over the other.
Keller Williams Asheville: A Better Way to Buy and Sell
Why get your heart broken by a home listed at a dream price, only to find out that the appraiser’s value is way higher than you initially thought (or not even on the market at all)?
There’s a better way to buy and sell homes in the Asheville area. Keller Williams Asheville has a searchable map just like Zillow, but with more accurate listings in the Asheville area. We live and work in Western North Carolina, and closely monitor the real estate trends in every neighborhood in the region. When you work with Keller Williams, you’re working with a dedicated realtor that wants to get you the best deal possible.
If you’re ready to get started on buying or selling your home, get in touch with us today.
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