What’s going on with Zillow today? You’ve probably seen their Zestimate feature, which is Zillow’s best guess about a home’s value. It can be a good starting point to determine if you should sell your home or whether a home you’re thinking of buying is a ripoff.

However, Zillow has been in the news lately in regards to a lawsuit over a Zestimate. They’ve even offered a $1 million reward for anyone who can improve the algorithm for their Zestimates. These Zestimates tend to be far off from a home’s true value, leading to misunderstandings for buyers and sellers. Since the San Diego market has jumped so much in recent years, we still see discrepancies with Zestimates.

Zestimates have a median error rate of 5.6%, meaning half of homes sell for almost 6% above or below what the Zestimate said it was worth. It can be much worse; last year, Zillow CEO Spencer Rascoff sold his Seattle home for 40% less than what the Zestimate said it was worth! He then bought a home for $1.6 million more than what the Zestimate called for.

“Zillow has been in the news lately in regards to a lawsuit over a Zestimate”
About 80% to 90% of sellers quote the Zestimate to their broker for a listing price, and in many cases, the amount a buyer is comfortable paying mirrors the Zestimate. A real estate professional’s job is to bring an opinion of value based on years of appraisal experience. Unlike real estate agents, Zillow can’t physically go into a home to see its value, instead, they rely on data from an agent or the MLS. They can’t account for things like home upgrades or a grand view.

It’ll be interesting to see what happens thanks to the continued negativity surrounding Zestimates. However, it’s still the most used computer estimate out there for home values. Unfortunately, most buyers and sellers take this info as the end-all, be-all for their next move. It may seem like a good starting point, but it’s strictly data-driven, so it’s only as good as what’s put into.

If you want to know the true value of a home, speak with a real estate professional. If you have any questions about the value of a home you’re buying or selling, give me a call or send me an email. I’d be glad to help!