Zillow.com has given some homeowners a false sense of security about the value of their homes with the popular “Zestimate” feature on the Zillow website. Two Zillow sales executives recently confided to Beacham & Company that the median margin for error with Zestimates is 10% percent, meaning half of all estimates are incorrect by more than 10 percent when compared to the ultimate sales price of a home. In other words, a home that the Zestimate indicates is worth $ 500,000 has a 50/50 chance of being off by more than $50,000. Much of the reason for the dartboard-like results produced by Zestimates is that Zestimates rely on tax records which are often inaccurate or outdated. And square footage – a favorite data point Zestimate enthusiast – is usually the date paint that is most often inaccurate in the tax records. Think about it: If Zillow uses the sales price of one home to establish value for another home and the square footage of one or both homes is incorrect, how can the Zestimate accurately predict the value of any home? The answer is it can’t.
Printed in Vol 7 Issue 1 April 2014 of the Beacham Insider.