Joe Wilson's Silicon Valley Real Estate Blog

Everybody knows about Zillow the website that allows anyone to obtain a "Zestimate" or an instant market value for most any home whether listed for sale or not. I use it myself sometimes in order to see what the public is seeing about a particular home's value, particularly on my own listings. I've also had many clients speak about Zillow's Zestimates with some authority. I think any of these on-line sites which provide consumers information to help them in their real estate decisions are helpful (I even link to them from this site), but you have to understand their strengths and weaknesses and realize that sometimes and in some markets the value estimates can be extremely misleading. Zillow itself claims that their Zestimates are "usually" accurate to within 10%. That's a pretty low bar to set given that most Seller's wouldn't want to leave $100K on the table after selling their $1M home for only $900K. Conversely,particularly in the current market, any Seller who prices his home 10% above the current market value is going to find himself with a stale listing and no offers. Let me give you a few actual examples:

Last spring I had a Sunnyvale listing with Cupertino schools that Zillow had priced out at $1.10M.  My Sellers who had used Zillow to find this out told me that they felt it was worth about $1.1M.  I did my own analysis based on recent pendings and solds in the neighborhood as well as the current competition and the local market statistics. Based on this analysis I suggested that we price the home at $1.25M and implement a multiple offer process to try for an even higher price. Within one week we had nine offers and ultimately negotiated a sale price of $1.37M or 25% above Zillow's Zestimate! So Zillow can be dead wrong about pricing but here's the really deceiving part: if you go to Zillow now and look at the graph of market value for that same home, you'll see no signs of their huge error. What they do is update the market value to correspond to the actual sale price and then re-adjust the graph leading up to that sale price to make it appear that their Zestimate was accurate!

Another example: I recently did a little experiment in which I randomly selected a few properties on the MLS that had closed escrow within the previous three days.  My plan was to see what the actual sale prices were before the public records had a chance to be updated and before Zillow could revise their Zestimates. A few of Zillow's Zestimates were quite accurate, a few were within their 10% accuracy band but several were way off. For example:

2209 Tiara (East Valley); Zestimate $547K; Actual $371K; Error +47%

8629 American Oak (Evergreen); Zestimate $462K; Actual $565K; Error -18%

14652 Berry (Cambrian); Zestimate $598.5K; Actual $729K; Error -18%

13610 Beaumont (Saratoga); Zestimate $1.415M; Actual $1.3M; Error +8.8%

1442 S. Wolfe (Sunnyvale); Zestimate $710.5K; Actual $529K; Error +34%

So, the question becomes how can you tell when Zillow is accurate and should it even be used? Quite simply, you can't tell when it's accurate and even when it meets its own 10% accuracy claim, that's way too inaccurate for most Buyers or Sellers. What it is good for is following pricing trends and finding out the last (and hopefully) recent sale price of a home.Other than that, take Zillow's Zestimates with a big grain of salt and consult your professional Realtor when an accurate valuation really matters.