Many people use “Zestimates,” Zillow’s estimates for property value, or other online estimators, to find out how much homes are worth. These tools can be used to track changes in your home’s value or find out if your home’s worth enough to refinance. However, online estimates may not be as accurate as they seem.
Here’s why:
Inaccurate input data
Online estimator’s algorithms use user-submitted data and public data to update the property values on the site. So if the data (e.g., the size of the property in square feet or the amenities available in the home) are wrong, then the online estimates are also incorrect.
By Zillow’s admission, the Zestimates don’t change immediately or at all sometimes even when users correct errors in the necessary information. One way that Zillow resolves this problem of inaccuracy is by giving a range for the property value.
Inaccurate tax data
A property’s last sale date and price affect its online estimate in varying degrees. When this data is inaccurate, it leads to errors in the sales price estimates of a home and other comparable homes in an area.
Zestimates also factor in actual property taxes and tax exceptions among other tax-related data. This data can be inaccurate if a tax accessor uses incorrect property values to come up with the assessed value.
Unaccounted-for home improvements
Online estimators frequently use permit records from property tax authorities to learn about any improvements that a homeowner makes to their property. So if a homeowner makes a home improvement that doesn’t need a permit, online aggregators won’t learn about it.
As a result, Zillow’s estimate of the home’s value won’t be up to date. Similarly, comparable improvements to other homes in the area may not map directly onto the Zestimates, further rendering them inaccurate.
The volume of home sales
A high volume of home sales in an area increases the accuracy of online aggregators. So the Zestimates for rural areas with few home sales is less accurate than the Zestimates for major cities with hot home markets. Using a real estate agent improves your accuracy in this case.
Zillow algorithm updates
Zillow’s algorithms are regularly updated to make them increasingly accurate. Changes in the algorithm may lead to noticeable changes in reported home values in the absence of real market forces. Although, these changes typically result in reported estimates that are more accurate.
