Aside from this $128,000, Swarovski crystal-studded toilet we know you’re saving up for, purchasing a home likely to be one of the biggest financial decisions you will ever make. Because, let’s be honest—that toilet would look pretty silly in a studio apartment.
Establishing reasonable market value is one of the most important services your real estate agent can perform for you. Beverly-Hanks utilizes a number of national, regional, and local resources to help you determine the most appropriate offer to make on your dream home. However, if you’re shopping around on other sites, as well, you may come across the infamous Zillow ZestimateⓇ.
What does that Zestimate represent, and does it tell you what you need to know about a property? Keep reading for the answers to those questions and more.
What is a ZestimateⓇ?
Zillow’s Zestimate is an estimate of value using a proprietary formula created by the online real estate database company. Zestimates cover more than 100 million homes across the United States. A Zestimate is calculated from physical attributes, tax records, and user submitted data.
Here’s how Zillow describes the formula:
What is a Zestimate Not?
As was made very clear in the video above and throughout Zillow’s website, a Zestimate is not a “Zprice,” and not a “Zappraisal.” It is a starting point in determining a home’s value that doesn’t account for condition, features, or specific location of the home. Mistakes or omissions in property tax records, recent additions and upgrades, housing turnover, and even changes to Zillow’s algorithm can affect a home’s Zestimate. Only half of the time is a Zestimate within 4.3% of the selling price of a home.
Just How Accurate is a Zillow Zestimate?
According to Zillow:
“The Zestimate’s accuracy depends on location and availability of data in an area. Some counties have deeply detailed information on homes such as number of bedrooms, bathrooms, and square footage, and others do not. The more data available, the more accurate the Zestimate value.”
With new updates in place (see below), Zillow reports a national median error rate of 4.3%. This means that half of the home values are closer than 4.3% to the Zestimate, and half differ more than that. Zestimates also vary in accuracy by state and by major metro areas for the reasons Zillow mentions.
Locally, we’ve seen that Zestimates are off by around 10% in neighborhoods across Western North Carolina. That may not feel significant. However, consider what a 10% difference means to the closing costs you may need and the mortgage you will acquire. At WNC’s median sales price of $279,925, that’s a difference of $27,993!
Zillow Reports to have Improved Accuracy by Moving to the Cloud
Zillow recently announced its own internal major updates to Zestimates. By leaning on Amazon Web Services to help process millions of images per day, Zillow can reportedly process its data three times faster than before. This update in speed allows Zillow’s teams to move at a faster pace, resulting in increased accuracy. Zillow now says Zestimates have an accuracy of 4.3% nationwide, down from 5%.
Keep Calm and Shop On
It remains to be seen whether a more improved algorithm will be submitted in Zillow’s public competition—or if Zillow will implement any updates results from contest entries. In the meantime, however, it’s best to remember that even a 4.3% difference can translate to tens of thousands of dollars in our local real estate markets.
By all means, check out the Zestimate during your home search. But when it comes to making an offer, let our agents’ local market knowledge and experience serve in your favor. After all, you want to have some savings over for that perfectly bedazzled toilet.
If you would like more information about the true market value of a home you’re considering, our experts at Beverly-Hanks are here to help. Contact us today to speak with a Beverly-Hanks real estate agent about buying homes and land in Western North Carolina.