Zillow’s Zestimates have far and away become the most widely used online home valuation tool for active buyers and sellers, as well as real estate enthusiasts who like to stay current. Some people love ‘em, some people, including a lot of real estate agents, hate ‘em. But rather than rehash yesterday’s debate about the existence of Zestimates, I’d rather tell you what you need to know, both the good and the bad, about Zestimates. Then you can use them to make more informed real estate decisions. So here are the 8 things you need to know:
- Zestimates are a great starting point to get “in the range.” The easiest way to get a decent idea of a home’s value is to pull up its Zestimate. That’s a big part of why Zillow is far and away the most popular real estate site. So what does getting “in the range” mean? In Colorado, Zestimates are within 20% of the sales price 92.8% of the time according to Zillow’s most recent data. So 9 times out of 10, the Zestimate will give you a decent idea of a home’s value. Of course, the typical resident of any given neighborhood can probably do better than plus or minus 20%, but for a free online tool with a slick user interface, the Zestimate does this job well.
- Zestimates are not so great at setting an exact value. When you need to pinpoint a home’s value and not just get in the range, Zestimates are a bit limited. Again, using Zillow’s own published data, the median error of Zestimates for homes in Colorado is 4.0%. That means the Zestimate value for half the homes in Colorado are within 4% of the selling price, and half are off by more than 4%. That sounds ok if your home happens to be in the half that are within 4%, but keep in mind that 4% is actually plus or minus 4%, for a total range of 8%. With a median home price of $336,500 in Colorado, that translates into a range of $26,920. Not exactly pin point accuracy and not chump change if you’re a seller or buyer. Note- accuracy within Colorado varies, but most counties are right around that 4% median error. Douglas County has the highest accuracy at 2.9%. See the full list here.
- Zestimates can’t smell the house. One of the reasons Zestimates are not pin point accurate is quite obvious- the algorithm can’t actually visit the home. A home that reeks of pets is not going to sell for as much as the exact same home that is odor free. Zestimates can’t account for physical attributes that can have huge impacts on a home’s salability and value. Examples include: light or dark, airy or stuffy, open or choppy, fresh or dated, pristine or beat up? Furthermore, a home that shows well due to wonderful staging and appeals emotionally to a prospective buyer can easily sell for 5 or 10% more than the exact same home that is vacant, barren, and lifeless. The Zestimate algorithm (at least today) has no way of baking these critical factors into the model.
- Zestimates have a hard time with luxury homes. In 2015, the Seattle home of Zillow CEO Spencer Rascoff sold for $1.05 million. All well and good, except that the Zestimate for Rascoff’s home at the time was $1.75 million. A mere 40% off. Whoops. This is an example of what Zillow Senior Economist Skylar Olsen calls the “classic luxury homes problem.” According to Olsen, Zestimates can’t take into account non-quantifiable facts, such as layout, design or lighting, and these facts can have much more of an effect on the values of luxury homes.
- Zestimates should not be used to set list price. A list price is not just a measure of a home’s intrinsic value, it’s also a reflection of current market conditions at a distinct snapshot in time. The Zestimate algorithm does not account for current market metrics such as showing activity and the number of active listings that are direct competitors. However, a local professional (like me!) does account for these important variables when determining list price. Not to mention, in today’s market it often makes sense to set the list price on the low end of the market range to attract multiple buyers who bid against each other, ultimately setting a value at the high end of the range or establishing a new range altogether.
- Zestimates should not be used to set offer price. The Zestimate is just another data point among the many that are used to determine an offer price, but certainly should not be the most important. Zestimates are historical “look back” indices and do not reflect the micro market conditions for a given listing at the exact time an offer is submitted. For example, the Zestimate has no way of knowing that there are already four other offers on the table, two of which are all cash. In fact, telling the sellers that your offer is based on the Zestimate can look amateurish and cause the seller to dismiss you as not a serious buyer.
- Zestimates are great at showing historical trends. Zestimates may have a hard time pin pointing home value or list price, but they are quite effective at showing historical trends in value over the years in a given geography. The trick here is to use a decent sized area, such as zip code, city or county, and not a single property in order to eliminate the spikey ups and downs and get an accurate overall trend. You can find trend data here.
- Zestimates are fun! Who doesn’t like to get an idea what their home, or their friend’s for that matter, is worth, especially in a market where values are rising.
Big picture – Zestimates are one of the many tools that technology has put in the hands of consumers. And we believe the more tools that consumers have, the better.
As a tech forward brokerage, 8zers embrace technology. We formed a deep partnership with Zillow to ensure we deliver every possible technological advantage to our clients.
In fact, 8z has a larger presence on Zillow than any other brokerage, team or agency in Colorado.
This ensures our sellers’ listings receive maximum exposure on Zillow, the site that has more buyers than all other real estate sites combined.
What we’re most proud of at 8z is that our Zillow clients absolutely love us. These are folks who started their home search or selling process on Zillow, and then selected us as their agent. We think they got the best of both worlds – great technology and a great agent (yeah that’s me). But don’t take my word for it.
As of today, we’ve been reviewed by 3,780 clients on Zillow. We have earned an average rating of 4.96 out of 5 stars. No real estate brokerage in Colorado has more reviews and a higher rating. Check out our Zillow reviews here.
Personally, I am so thankful for each and every client I’ve had the opportunity to serve.
A Refreshing Look at the Question “What is my House Worth?”
Let’s take a look at some of the stats for our area to get a better idea of what is going on in the local housing market!
In Fort Collins for July 2017, the average sales price* was:
- $400,000 for Single Family Homes (up 6.7% from 1 year ago)
- $276,875 for Condos/Townhomes (up 8.6% from 1 year ago).
I have access to detailed stats across Colorado and can help you find out the worth of your property any time. I can also help you determine what your home is worth even if it’s in a different area. As always, I am here for you. If it’s time for you to buy or sell, let’s talk.
*Median sales price based on a six-month moving average