Zestimate® or Guesstimate?
When used properly, a Zestimate is a useful tool; when misused for
things such as contract negotiations and pricing real estate, it causes
problems. Let’s look at what a Zestimate is, and how it should be used.
What is a Zestimate?
This definition of Zestimate is from Zillow’s website:
This definition of Zestimate is from Zillow’s website:
“The Zestimate® home valuation is Zillow’s estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home’s value. The Zestimate is calculated from public and user submitted data;
your real estate agent or appraiser physically inspects the home and
takes special features, location, and market conditions into account. We
encourage buyers, sellers, and homeowners to supplement Zillow’s
information by doing other research such as:
- Getting a comparative market analysis (CMA) from a real estate agent
- Getting an appraisal from a professional appraiser
- Visiting the house (whenever possible)”
Let’s break Zillow’s definition down and see what it tells us:
- It is not an appraisal; it is a starting point. This statement is telling you that Zestimates are not meant to be accurate measures of value. Rather, Zestimates are meant to give you a ball-park idea of the value.
- (It) is calculated from public data. This informs you that Zestimates pull data from county assessor’s records. These records are used to calculate your property taxes, and are notoriously inaccurate measures of market value. Depending on the municipality and when the last re-assessment was performed, many assessments can be way off (up or down) than the sales price. Most taxpayers want the assessed value as low as possible so they pay lower taxes.
- Get a CMA from a High Volume real estate agent. Zillow says “your real estate agent physically inspects the home and takes special features, location, and market conditions into account.” Not to mention recent sales and homes currently on the market, and the home’s condition. Zillow can’t know a house has a remodeled kitchen or smells like cat pee.
How to Use Zestimates
Use Zestimates as a starting point to determine the general price point of a neighborhood. In other words, houses in the neighborhood are mostly $250,000 or $350,000. You can also use Zestimates to compare one house to another, which will tell you if a house is generally higher priced than others around it.
Use Zestimates as a starting point to determine the general price point of a neighborhood. In other words, houses in the neighborhood are mostly $250,000 or $350,000. You can also use Zestimates to compare one house to another, which will tell you if a house is generally higher priced than others around it.
How NOT to Use Zestimates
The biggest misuses of Zestimates are negotiating the purchase price of a house you want to buy, and setting the price of a house you want to sell. For these tasks, you must get a market analysis from an experienced real estate agent (as all of Homeowners Concept agents are). You need an up-to-date, accurate number based on research conducted by a qualified Realtor who is knowledgeable about pricing, not a computer program using inaccurate data.
The biggest misuses of Zestimates are negotiating the purchase price of a house you want to buy, and setting the price of a house you want to sell. For these tasks, you must get a market analysis from an experienced real estate agent (as all of Homeowners Concept agents are). You need an up-to-date, accurate number based on research conducted by a qualified Realtor who is knowledgeable about pricing, not a computer program using inaccurate data.
