If you’ve been doomscrolling your way to online real estate listings, dreaming of buying a home with more space and finding a lot that you can’t afford, you’re not alone. Searching Zillow has become a pandemic coping strategy for many, though rapidly rising sale prices are likely contributing to our anxiety rather than alleviating it. Nationally, home prices in December increased 10.4% over the previous year.
It’s easy to get caught up in Zillow’s automated home value estimates—Zestimates—when starting your (real or hypothetical) home search. But Zestimates don’t often reflect what a home is actually worth, nor what it’ll sell for in the end.
In some markets, like highly competitive Phoenix, real estate agents have found that the Zestimate model tends to overvalue properties. On the flip side, the Zestimate doesn’t matter at all if sellers are listing homes at higher prices and buyers are offering much more than that.
What is a Zestimate, anyway?
The Zestimate is Zillow’s home valuation tool. It uses available data from public records as well as information about a home’s features to approximate the value. Zestimates, when available, are included in property listings.
Here’s what the Zestimate considers:
- Home features: square footage, location, number of bedrooms and bathrooms, etc.
- “On-market” data: listing price, days on the market, data about comparable properties.
- “Off-market” data: tax assessments and prior sale prices.
Zillow acknowledges that its Zestimates are not official appraisals and fall within a margin of error. The more data that’s available for an area and a specific property, the more accurate the Zestimate.
However, the median error rate for homes on the market is 1.9%, meaning only half of all Zestimates are within 2% of the selling price. The median error rate for off-market homes is 7.5%. The error rate is higher in some markets and lower in others.
The bottom line, though, is that a Zestimate could be thousands or tens of thousands of dollars off—and it’s not the same as the sale price. What this means is that you shouldn’t take Zillow’s Zestimate as gospel, whether you’re buying or selling, but instead it can be helpful to have a real estate agent who can give you a more specific analysis of your market and determine what’s over- and underpriced.