Update July 2019: Zillow made a major update to their Zestimate accuracy and how they report median errors so I updated the calculator. For more on the updates, click here.
How Accurate Are Zillow Estimates?
Thinking of selling your home and wondering what it’s worth? Be careful about falling in love with home value estimates you see online because many are far above market value.
Home sellers who “anchor” on inaccurately high estimates will overprice their homes and it’s hard for them to lower the price later. (Sellers usually know when an estimate is way too low but they tend to fall in love with high ones.)
Home listings that start out way overpriced can languish unsold and end up selling for less than if they were priced more accurately when they first hit the market and buyer interest was by far the highest.
A Little Experiment
When you’re surfing homes online you often see an estimate of each home’s value. Zillow is probably the most well known for doing this with their prominently displayed “Zestimates” of home values but other real estate websites do it as well.
Most of these websites don’t give you an estimated price range, they give you a price down to the dollar and that precision gives their estimates a misleading air of accuracy.
Home sellers can get a quick glimpse into the inaccuracy of online home value estimators by comparing the estimates different websites give for the same house.
Real estate websites could easily say something along the lines of, “We estimate a 50% chance that this home would sell between $X and $Y.” Home buyers and sellers could then get an immediate, intuitive feel for how accurate an individual home value estimate is by how far apart $X and $Y are.
Zillow publishes the accuracy of their Zestimates so let’s use their median errors data to turn their Zestimates into estimated sales price ranges for individual homes.
Online home value estimators are far better than they were a few years ago but they aren’t comparable to value estimates made by professional appraisers.
They’re great data points for home sellers to have as long as sellers realize that online home value estimates are just ballpark estimates.
If you want to have the best possible estimate of your home’s value before you put it up for sale, hire a good appraiser or a real estate agent you trust. It could save you time, money and the heartbreak of slowly realizing that you trusted the wrong estimate and your home sale is going nowhere until you make a change.
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An earlier version of this article appeared in Forbes.com.