Zillow has become the 3rd largest real estate information site with a 5.4% market share. This has happened with good reason. It is easy to use, and provides their “Zestimate” for many homes in their database. Pretty cool, but how accurate is this estimate of value and how is it determined?
How do they come up with the Zestimate?
According to Zillow’s website FAQ, they “compute this figure by taking zillions of data points – much of this data is public – and entering them into a formula. This formula is built using what our statisticians call “a proprietary algorithm” – big words for “secret formula.” Currently, we have data on 100 million homes on Zillow and calculate a Zestimate on 72 million of those homes.”
For instance, the chart below shows the statistics for counties in PA and I have highlighted Montgomery County specifically. As you can see, the Zestimate is within 10% only 54% of the time. This means that they are off by more than 10% 46% of the time! They also state that they are within 20% of the sale price 78% of the time which means that 1 in 5 homes is incorrectly priced by more than 20% of its actual value.
To put things into perspective, on a $300,000 house in Montgomery County:
46% of the Zestimates are within $30,000 of the value,
78% of the Zestimates are within $60,000 of the value,
and 22% of the Zestimates are off by MORE THAN $60,000 of the actual value!
What does all of this mean? The bottom line is that you need to work with professional who knows the local market and has access to up-to-date data from the MLS and courthouse records in order to analyze that data along with the amenities, location and condition of the property in question. Here is an east and FREE way to do this—-call or email me!