When you’re surfing homes online, you’ll often see an estimate of each home’s value. Zillow is one of the most well-known websites for doing this with their prominently displayed Zestimates.
Zestimates are a popular tool for seeing how much homes are worth, but there are several reasons these numbers should be taken with a grain of salt. Here’s why:
Inaccurate Basic Information
Zillow’s unique algorithms update its collection of property values based on both public and user-submitted data. So if the number of bedrooms or bathrooms in a home, its square footage, or its lot size are inaccurate on Zillow, the Zestimate will be inaccurate.
Zillow also factors the date and price of the last sale. If this information is inaccurate, it can throw off the Zestimate. And since comparable sales also affect a home’s Zestimate, a mistake in one home’s sales price record may affect the Zestimates of other homes in the area.
If a homeowner makes improvements or upgrades to a property that would increase the value of the home, Zillow isn’t going to catch wind of it unless the homeowner takes out a permit from the city. That information then has to be passed along to the property tax authorities and entered into the public record for Zillow to factor the upgrade into the home’s Zestimate.
For example, if you add a permitted three-season room to your home that information would likely find its way into the Zestimate. But if your kitchen just got a Joanna Gaines-inspired facelift complete with new marble countertops and ginormous farmhouse sink that didn’t require any major permits, yet your neighbor’s home is still sporting its original 1975 kitchen, Zillow will value both homes similarly even though your home may fetch a higher price.
Housing Turnover Rate
The more home sales there are in your area, the more data Zillow has about how much buyers think those homes are worth, which makes Zestimates more accurate. So if you live in a hot market in California, your Zestimate might be more accurate than if you live in a rural town in Michigan where sales are fewer and further between.
The bottom line: Zestimates are only meant to be used as a broad guideline.
For the best possible estimate of your home’s value, hire a licensed appraiser or a trusted real estate agent. It will save you time, money, and the heartbreak of trusting the wrong estimate.