Why Zillow can get your home value wrong
While I personally believe that Zillow is an awesome product and enjoy the creative thinking that has surrounded it, there are a few things that you need to know when using their estimates of home value, or what they call “zestimates”.
They use public records instead of multiple listing service data. Depending on the town or city your home is located in, the public records are notoriously inaccurate, especially when it comes to finished area and living area.
Multiple listing service data is entered by realtors who are responsible for the accuracy and while it can also be imperfect, the MLS data is much more likely to be correct.
Because the algorithms in Zillow are heavily reliant on living area and cost per square foot, these public record inaccuracies can introduce a statistically significant degree of error into their estimate of home value.
They use a radial distance from the house location to select comparable home sales in the vicinity.
In other words, they will select all houses within a half-mile radius of the subject property that have been sold within the last 6 months.
While this makes absolute sense, mathematically, it doesn’t make sense in the real world.
The reason is, that if a property is on the edge of two different zip codes of highly differing socioeconomic strata and real estate values, the results will introduce a statistically significant degree of error into their estimate of home value.
For example, a house in South Wayland commands considerably more in price than a house in North Framingham, but Zillow will include houses in North Framingham that are within a half-mile of the Wayland house when figuring their “zestimate”.
Zillow is very good at analyzing quantitative factors (facts) but doesn’t yet have the capacity to include qualitative (feelings) factors, what we realtors call the full 360 degrees.
There are a number of highly subjective factors that help to determine a home’s value, and these factors are constantly changing with trends and popularity of … colors, materials, lifestyles and family makeup, just to name a few.
And last, just as you can check-out a car on many great websites, commercials, movies and in pictures, you don’t really know how you’d like it until you drive it.
Imagine yourself test-driving dozens of cars and then comparing them with someone else who’s only looked at them on websites, who’s opinion of value/drivability/comfort do you think would be more accurate?
So in summary, I believe that Zillow is a great website and I think it is very good at coming up with a blazingly fast sweeping generality of a home’s value. But in its present form, it will not replace the complete market analysis of an experienced, full-time professional realtor.
For a really accurate market analysis of your home by Mike Hunter contact me, I’ll be glad to help you.