Demystifying the Zillow Zestimate: How Accurate Is It?

Demystifying the Zillow Zestimate: How Accurate Is It?

  • Alex Lazzereschi
  • 08/24/23

Zillow's Zestimate has long been the subject of heated debate among real estate professionals and homeowners alike. But how accurate is this ubiquitous online tool in determining a property's value? Is it a reliable source of information for real estate agents and their clients? This article will explore the Zestimate's accuracy, breaking it down for both on-market and off-market properties.

What Is the Zillow Zestimate?

Zillow's Zestimate estimates the market value of nearly every residential property in the United States using proprietary technology and an automated valuation model. However, the Zestimate is not an appraisal; appraisals are performed in person by trained professionals who unbiasedly determine a property's fair market value.

Zestimate Calculations Explained

A Zestimate is calculated based on multiple data points, including recent comps, home features, physical attributes, historical data, tax assessments, MLS data, listing price, market trends, seasonality, and user-submitted data. While the algorithm is constantly updated, not all MLSs participate in Zillow's data collection, resulting in limited data sets and potential inaccuracies.

Zestimate Accuracy: The On-Market vs. Off-Market Breakdown

Zillow claims a "nationwide median error rate" of 2.4% for on-market properties. However, the error rate for off-market properties is significantly higher, at 7.49%. The accuracy of a Zestimate depends on the data available, and remember that public data varies from state to state.

On-Market Zestimates

Interestingly, on-market Zestimates often change to align with the listing price, arguably benefiting from the local expertise of real estate agents. This makes on-market Zestimates more accurate.

Off-Market Zestimates

Off-market Zestimates exhibit higher error rates, and as Zillow's transparent data shows, the nationwide median error rate (7.49%) reflects the following accuracy range:

  • Within 5% of Sales Price: 36.28%
  • Within 10% of Sales Price: 60.57%
  • Within 20% of Sales Price: 81.95%

Geographical differences also affect Zestimate accuracy, with certain states and metro areas displaying more accurate Zestimates. In general, on-market Zestimates are more accurate due to the inclusion of listing price data.

So, How Accurate Are Zestimates?

While the on-market Zestimate appears relatively accurate, the off-market Zestimate is less reliable, especially compared to valuations provided by experienced real estate agents. However, a Zestimate can still be a useful starting point in determining a property's value.

Strategies for Analyzing Zestimates

Most clients understand that a Zestimate is a mere starting point, and a thorough comparative market analysis by a professional is necessary to obtain a more accurate valuation. For those clients who are fixated on their Zestimate, here are some strategies to address their concerns:

  1. Use your data: Explain how a Zestimate is calculated and walk them through your listing presentation, showcasing your experience and successful track record in pricing properties.
  2. Compare Zestimate to actual sale prices: You can highlight the potential discrepancies in those calculations by comparing local sale prices to their corresponding Zestimates.

In conclusion, while the Zestimate can be a helpful starting point, it's crucial to rely on the expertise and experience of real estate professionals for accurate, tailored valuations. If you would like insight on your homes valuation, start with our Home Valuation Report

Work With Us

Helping home buyers find just the right home and helping home sellers find just the right buyers for their homes. We help people in the Pleasanton, Dublin, Livermore, San Ramon and Danville area with property of all kinds.

Follow McDowell Homes Group on Instagram