Zestimates and other online home valuation tools are helpful for estimating the value of your home, but they should not be used as a substitute for an appraisal. This is because they depend on data specific to a specific area, including square footage and the number of bedrooms and bathrooms. This can result in a price difference between the actual value of the home and the estimated value. For example, a home in Midtown Sacramento, California, was recently estimated by Zillow to be worth $380,000, while the actual price was $380,000.
Error rates of Zestimates vary depending on metro area
Error rates of Zestimates and similar online home valuation tools differ by metro area. Nationally, they are between one and six percent. In a metro area where there is a significant amount of data to work with, that error rate drops to a mere one to three percent. Error rates are also affected by data quality. Homes listed for more than a year are likely to contain inaccurate information that affects the Zestimate’s accuracy.
A Zestimate for a $600,000 home may be over $100,000 or under $645,000. It could also be over $667,800. In addition, errors in other metrics vary by metro area. A Zestimate based on past sales may be inaccurate by as much as eight percent. It’s not uncommon for a Zestimate to be at least two percent higher than what the home actually sold for.
Zillow constantly improves its algorithm. That’s why its Zestimate can vary so widely by metro area. However, a single estimate may not reflect the current market’s value. Zillow’s algorithm changes every two or three days, and sometimes that means your Zestimate could change significantly even if there are no recent changes. Those factors can affect how much your house is worth.
Data used in calculating Zestimate
The Zestimate tool lets you know what your home might sell for based on public data and comparable sales. This tool is only as good as the data behind it. It might not be the most accurate if you haven’t made any improvements to the home. The value may also differ depending on the area where you live. The number provided by Zestimates may be too high or too low if the neighborhood is bad.
Although the Zestimate is meant to be a guide for homebuyers and sellers, its accuracy is not very good. Zillow co-founder Spencer Rascoff actually sold his home for 40% less than the Zestimate was based on. Despite this flaw, it’s clear that many homeowners are putting their faith in the tool, though it’s important to understand the data that goes into the calculations.
Zillow uses the data from comparable homes to determine a Zestimate. This information can be inaccurate or outdated, and the algorithm used to create Zestimates is continually being updated. Zillow also incorporates information about properties that have sold off the market for at least one year. This information can change over time, so it’s important to use the data carefully. A Zestimate can be a good starting point for a home sale, but should never be deemed accurate. Get the best cash offer for your home.