Many times when I’m meeting with a homeowner who is considering selling their home the subject of zestimates by Zillow is brought up. I always point out that zestimates are just a starting point and are based on a proprietary desktop formula, not a field appraisal.
Indeed, Zillow themselves recommends a buyer or seller do their own research by requesting a comparative market analysis (CMA) from an experienced full-time real estate agent and/or an appraisal from a professional appraiser. Such appraisals can cost between $350 – $550 and the valuations can vary but most real estate agents offer a complimentary CMA.
In my experience, many of the zestimates by Zillow are not close to the true market value, sometimes understating but more often overstating value.
Reasons for understated values:
- Zestimates do not include property renovation updates that have not been reported to the local assessor’s office. And many such updates are unreported.
- Zestimates are based on historical sales data – home sales as old as 6-12 months. But if the market is hot – low inventory and many buyers – real time prices can rise significantly in just a few months.
Reasons for overstated values:
- If a home is in poor condition with deferred maintenance, zestimates by Zillow won’t be able to account for that.
- Again, because of the use of historical data, if the market is slow – large inventory of homes for sale and few buyers – real time prices may have dropped.
A look at Zillow’s numbers
The most recent zestimates by Zillow accuracy reports (June, 2019), as reported by Zillow, shows the following results for the Montgomery County real estate market:
- 35.8% of zestimates were within 5% of the final sales price
- 59.1% of zestimates were within 10% of the final price
- 81.6% of zestimates were within 20% of the final sales price
Extrapolating into 2020, there were 1,538 homes sold in Montgomery County in the first quarter of the year. In Chester County, there were 1,330 homes sold in the same quarter.
Ok, so let’s do the math. In Montgomery County the average sale price of a home in for the 1st quarter of 2020 was $354,915. Using Zillow’s results from their most recent report, their zestimates were off by plus/minus $17,746 (5%) on 551 homes (35.8% of 1,538), plus/minus $35,492 (10%) on 909 homes (59.1% of 1,538) and plus/minus $70,983 (20%) on 1255 homes (81.6% of 1,538). Chester County numbers are very similar to those of Montgomery County. If you’d like details feel free to contact me.
I think we can all agree that zestimates by Zillow home value estimates in the Montgomery and Chester County real estate markets are a guide only and should not be used as a true valuation of your home. Yet pricing a home accurately when selling is a critical aspect of the selling process.
Your best bet: start your home valuation by contacting an experienced full-time real estate agent – an agent who has sold hundreds of homes in the area with numerous online client reviews. And a good place to view these reviews is on Zillow.com. They verify every review by confirming the sale of the home and the real estate agents who represented the buyers and/or the sellers.
Should you have questions, would like a CMA or would just like an informal meeting to discuss your options, please call/text/email me – I’m always happy to help! Cell (610)864-9872 or send an email to [email protected]
The author, Rick Sheppard, is a licensed real estate broker with RE/MAX Achievers, Inc in Pennsylvania and a 32+ year veteran of the real estate trenches. He knows a lot because he’s seen a lot. If you have any questions about this or any real estate related topic, feel free to contact Rick at [email protected] and he’ll do his best to answer your questions.