First let me say that I love Zillow. It is informative, interesting, and has tons of data. I like that it adds transparency to the real estate process. I also advertise on Zillow periodically. The one item that never ceases to cause a stir is their estimate of home values, or Zestimate®. I hear comments from sellers regularly about how wonderful Zillow is (usually because they value their home high), or how awful zillow is (not surprisingly, when the Zestimate® seems low). So how accurate are Zillow’s estimates anyway?
I took a look at the most recent 50 sales of single family homes in Pleasanton. in 4 price segments. These sales spanned from early 2014 to present. I compared the actual sold prices to the estimated value from Zillow. The results are certainly interesting:
A few observations:
1. The higher the price range, the less accurate Zillow was. This is not shocking, as there are more pronounced differences in larger, more expensive homes than there are in modest (by Pleasanton standards, not by the standards of the rest of the country who thinks we are all crazy for paying $900,000 for a 1700 sq ft house, but I digress).
2. Zillow’s estimate was off by 5% or more 38% of the time for homes between $500k – $1.0 Million. That percentage increased as the price range increased, and showed more than 5% difference a whopping 86% of the time on homes over $2 million.
3. Zillow’s estimate was off by more than 20% from the actual sales price 4% and 0% of the time for lower end homes, jumping to 16% and 36% for the higher priced homes ($1.5 – $2 million and $2 million +)
4. Zillow’s estimate consistently came in below the actual sales price for homes under $1,500,000, and a significant percentage of the time came in higher than the actual sales price above $1,500,000 (66% for homes between $1.5 – $2 Million, and a whopping 96% of the time for homes over $2 million). This is directly related to how hot the market was in these price brackets, with lower priced homes often seeing multiple offers and overbids, and higher priced homes seeing longer market times and a more balanced market.
Obviously, building an algorithm to estimate value is a huge, complex undertaking. Zillow will always struggle with values in the higher price ranges, as it is impossible to put subjective value components into those homes. Things like upgrades, views, privacy, floor plan, flow, room count, etc are impossible to quantify in any meaningful way. But I know they will keep trying, and we will keep watching. And if you want a more accurate idea of what your home is actually worth, call me, or any knowledgeable, experienced REALTOR®.
Note: Statistics obtained from the Bay East MLS and Cloud CMA. Information is believed to be accurate but not guaranteed.