Zillow’s Zestimates have become the first choice for millions of homeowners and buyers. But behind these appealing figures lies an important question—how much can you actually trust it? To answer this, we’re peeling back the layers of Zillow’s valuation process and revealing whether it’s accurate or not. Let’s check it out.

What is a Zestimate?

A Zestimate is Zillow’s trademarked value estimate for a property. You can access it for free, and the figures are updated regularly. As the name itself suggests, it is just an approximate estimate and not a substitute for a professional evaluation. In fact, the main aim of Zestimate is to help buyers and sellers make quick, data-backed decisions. 

How Does Zillow Calculate Zestimates?

Zillow’s Zestimates are based on an advanced Automated Value Model (AVM). Have a look at how it works:

• Data Collection

Zillow aggregates data from diverse sources to have a broad understanding of the home’s basic features and local market trends. Check out how it collects the data:

• MLS listing details from active and recently sold listings. 

• Access public records like property tax records, transaction history, deed information, etc.

• Homeowners usually update information, like renovations or additional square footage, on the platform. Zillow even considers such factors during price estimation.

• Comparative Analysis

The algorithm performs a detailed comparison between your home and similar properties. It looks at the sale prices of nearby homes. Even neighborhood-specific trends like average appreciation rates are also taken into account.

• Refinement via Machine Learning

Zillow’s algorithm learns from historical data and user feedback to refine its predictions. For instance, if previous homes in your area were sold above or below their Zestimate values, the algorithm automatically adjusts the figures for future calculations. Recent sales data is weighted more heavily than older transactions. 

Factors Considered For Zillow Estimates

The calculation of Zillow estimates is complex. But at the heart of it are a handful of key factors that determine the numbers you see. Check out them:

• Location of the Property

Real estate is all about location, and Zillow knows this better than anyone. That’s why the algorithm pulls data from local market trends and neighborhood comparisons. In fact, it creates a value profile based on where the property is located. Even the amenities near it will be considered. But, if there are any major changes in the area, like new infrastructure projects, it might take some time for the algorithm to catch up.

• Size of The Property

Zillow uses property records to analyze square footage and the number of rooms. Every room, right from the living space to the basements, will be evaluated. But here’s the catch: not all square footage is valued equally. A 2,000-square-foot home in a suburban area will be more valuable than a same-sized home in a rural area.

• Age of the Property

A newer home is more valuable as it has modern features and requires less maintenance. So, the Zillow algorithm considers the property’s age along with its condition for calculating the estimate. But, it may not always consider unique factors like renovations that modernize an older home.

• Comparable Home Sales

Recent sales of similar homes in the area are also taken into account. For instance, if three homes with similar square footage sold for $300,000 in your neighborhood, Zillow might use that figure as a baseline for your Zestimate. In such cases, the algorithm may omit the special upgrades of your home for evaluation.

How Accurate Are Zestimates?

Zillow algorithms mainly gather data from active listings with the most updated asking prices and interior pictures. Moreover, recent sales in the area also provide relevant benchmarks for the calculation. That’s why Zestimates are likely to be accurate.

Zillow officially claims its median error rate is:

• On-market homes: If a home is listed for sale, the Zestimate is typically within 2.4% of the final sale price.

• Off-market homes: For homes not currently listed, the error margin increases significantly to 7.49%.

Determining your home’s value is crucial for financial decisions like selling, refinancing, loan application, etc. Even though tools like Zillow’s Zestimate provide a convenient starting point, they rely heavily on algorithms. Sometimes, it can lead to inaccuracies. 

Actually, the most precise valuation comes from professional appraisers who physically inspect the property and account for current local market conditions. Yet, such evaluations could be costly.

So, if you want to balance both convenience and reliability, it is better to consider an average of the estimates by various online tools. Check out some alternatives to Zillow’s Zestimate and see how their features stack up:

Tools and Their Main Features

Tool	Main Feature
Redfin Estimate	Uses MLS data updated every 5 minutes for real-time accuracy.
Realtor.com	Combines MLS records with agent insights for well-rounded valuations.
CoreLogic	Focuses on advanced analytics trusted by professionals, including banks and insurers.
HouseCanary	Offers future market predictions based on robust local data trends.
Eppraisal	Provides comparisons between multiple valuation models.

Frequently Answered Questions

• Is the Zestimate the same as an appraisal?

No. An appraisal is performed by a licensed professional who inspects the property physically and provides an unbiased evaluation. On the other hand, Zestimate is just an automatic calculation based on public data. 

• Can I update the Zestimate for my home?

Yes. If you add more property details like home improvements on the listing, Zillow also considers them to update the Zestimate.

• Why is my Zestimate inaccurate?

Well, there are several reasons, such as outdated data, missing property information, lack of recent sales in the area, etc. Homes with unique features can also lead to less reliable estimates.

• What should I do if I need an accurate home value?

If you need a precise home valuation, it is better to hire a professional appraiser. With years of training and experience, they can provide you with a more accurate estimate.

Conclusion

Zillow’s Zestimates are undeniably convenient and a great tool for quick insights. Yet, its accuracy is a matter of debate. For major financial decisions—like buying or selling—it’s wise to pair Zestimates with professional appraisals from trusted real estate teams.

At One Team Home Solutions, we have a team of expert real estate professionals who can provide detailed appraisals that take into account every unique factor of your property. Let us help you make the most informed decision possible—contact us now!