If you have not heard of Zillow’s Zestimate yet, then “Welcome back from what must have been a long vacation”. The Zestimate has to be Zillow’s most popular tool and both home buyers and home sellers love it. Us Realtors on the other hand we love it NOT so much. Why? Because we have to defend the source of data we use to determine the value of a Spring Texas home which is the comps against the Zestimate. Many times the difference between the Zestimate and the comps is substantial which leaves us with a lot of explaining to do.
What exactly is a Zestimate? According to Zillow, “A Zestimate home valuation is Zillow’s estimated market value. It is not an appraisal.”
Since I have never performed my own comparison of Zestimates to actual sale prices of Spring Texas homes, I thought it was due time to dig a little deeper and find out just how accurate those Zestimates are. For my sample I used the 10 most recent homes we have sold either through representing the buyer or the seller. All sales occurred in 2009 and are for homes in the Spring Texas area.
Granted, I did a small sample but I still think some observations can be made about the data. With the exception of two of the home sales, the Zestimates were higher than the actual sales price. This observation is very enlightening to me because it explains as to why sellers are not happy with the comps I share with them. Sellers would rather sale their home for the Zestimate price and I can’t fault them for that.
In my sample, 70% of the Zestimates were within 10% of the sales price which does not sound like a lot. But in dollars that 10% difference between the Zestimate and the sales price translated into between $500 and $15,000. When I sit down with sellers and discuss a projected sales price they expect me to be a lot closer than 10% or $15,000. Thankfully, my projections are much closer. As they are usually within 2% of the final sales price.
I probably should not be a Zestimate basher because there are plenty other Realtors who have already done that for me. After all, Zillow’s advice for the Zestimate is “Use it as a starting point to determine a home’s value”. The only problem with Zillow’s advice is its NOT in BIG BOLD LETTERS. Instead their inflated Zestimate causes me to have to ruin a home sellers dream of riches when I sit down with them to discuss the comps and the true value of their home.
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