So how accurate is the Zestimate? Shoppers, sellers and buyers routinely quote Zestimates to real-estate agents — and to one another — as gauges of market value. Sometimes, if either the buyer or the seller won’t budge off Zillow’s estimated value, a home sale will die.
So, if they’re off the mark, how far off? Zillow CEO Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8%.
Though it’s not prominently featured on the website, at the bottom of Zillow’s home page in small type is the word Zestimates, a section providing helpful background information along with valuation error rates by state and county — some of which are stunners.
For example, in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it’s 12.9%. In Somerset County, Md., the rate is an astounding 42%. In some rural counties in California, error rates range as high as 26%. In San Francisco County it’s 11.6%.
In King County, the median error rate is 7.1%.
With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.
Seattle earns Zestimate’s highest rating of four-star accuracy with the following breakdown:
- 36% of Zestimates are within 5% of sale price;
- 66% of Zestimates within 10% of sale price;
- 89% have a 20% accuracy.
So, roughly speaking, about two-thirds of Seattle area Zestimates are within 5 – 10% of sale price accuracy.
How does one know if the Zestie for your home has a 10% error margin… or is off 20%? Or more? And, more importantly, how much does that make a difference?
Home value = $400,000;
- 10% error margin reduces home value to $360,000
- 20% error margin reduces home value to $320,000.
How to resolve this quandry?
Follow CEO Rascoff’s advice, and consider a Zestimate a ‘starting point.” Utilize more data than just from the web… True value is derived from two sources: one, recently sold comparable homes near yours, or market value; and, two, whatever a qualified buyer is willing to pay. While buyer perceived value cannot be calculated, market value can.