“Zestimate.” It’s a four-letter-word in most real estate offices. Bring up a Zestimate to an agent at an open house and you might get a polite nod from the agent, but on the inside he’s probably weeping, gnashing his teeth, and cursing the heavens.
To put it bluntly: you shouldn’t ever just rely on Zillow’s automated calculation of a home’s worth. Why? It’s automated. It relies on public records (which may be wrong or outdated) and average price per square foot for a neighborhood. Pricing a home to purchase or sell takes much more than a simple calculation. That algorithm approach means they’re off an average of 8% nationally. That’s a $60,000 difference on a $750,000 home. New York City’s prices are 20% off the Zestimate. Somerset County, Maryland, is over 40% off.
Many homes in our area have finished basements. That square footage does not show up in the tax records as tax assessors rarely enter a home and inspect something of that nature. That extra in-law suite or man cave could change the home’s size by 33%. Public records can also under-Zestimate the size of a home. What’s listed as a 300 square foot closed garage could actually be a 1000 square foot in-law suite with 4 rooms.
Zestimates also do not take into account renovations. If 10 homes on the block have already been upgraded to granite countertops and the latest stainless steel appliances and sold, then Zillow is automatically going to bump up the house on the corner with the broken shutters and 70s-era, pea-green stove. The owner of that home is going to assume she could get possibly $50,000-$100,000 more than she can because Zillow can’t personally evaluate her home’s actual worth.
Conversely, if you’re a buyer trying to go into an up-and-coming neighborhood and buying the first home on the block that’s been renovated, Zillow is going to lead you to believe that the house is severely overpriced. Zillow won’t know that the home has been renovated, so it’s going to assume it’s like every other home on the block.
Zillow’s own CEO Spencer Rascoff has said they’re a good “starting point.” Zillow is a good tool to get a rough lay of the land and get an idea of what you can afford, but be ready to be surprised when you talk to a Realtor or an appraiser when you need an accurate determination of a property’s value.
Although I might be tooting my own horn, the best way to gauge a home’s potential value is by talking to a Realtor who knows the area.
If you’re not ready to talk to a real estate agent yet and want to stay informed on current market trends, I suggest Homesnap. Shoot me an email and I will send you an invitation. While they also estimate, they give you a range of what the home could be worth instead of a precise number.