Many people use Zillow to value a home, but how accurate is Zillow? Zillow uses what they call a Zestimate to give values on almost every house in the United States. The problem with the Zestimate is it uses a computer algorithm to come up with a value. When valuing real estate, you need to have real people valuing homes in order to be accurate. When I look at my properties, Zillow comes pretty close to values on some, and on others, they are way off. I have been a real estate broker and investor for almost 20 years and have a decent idea of what the values are on my properties. The problem is how do you know if their value is correct on your house or not?
My Experience with Zillow Zestimate Home Values
I have been a licensed real estate agent since 2002. I have sold thousands of homes and completed thousands of broker price opinions. I am also an investor who flips 20-30 homes a year, and I own 20 long-term rentals. I know the values in my area because that is how I make money. I think the best way to test how accurate Zillow values are is to compare what I know my properties are worth compared to what Zillow says they are worth. This article is not a scientific study: it’s a simple analysis. On some properties, Zillow is right on, but on others, they are way off.
How is Zillow’s Zestimate calculated?
Zillow says they get their price based off a proprietary formula from public and user-entered data. If you want to get a more accurate value from Zillow, you can actually change the details of your own house on Zillow. Zillow is very clear that their price estimate is a starting point for homeowners or home buyers and should not be the only data used when determining value.
Part of Zillow’s calculations come from the sales of homes. You will see later in this article how a sale price can greatly affect what Zillow thinks a home is worth.
Zillow rent values
Zillow also gives estimates for rental rates on properties. Valuing rents on homes is much harder to compare than house values because you cannot look up what properties are rented for. I use sold comparable properties to figure house values in most cases, but rental rates are much more difficult to value because rents are not published in most cases. The best way to determine market rents is to see what people are currently asking for their rental properties, but you never know if properties will actually rent for those amounts.
Zillow actually does a pretty decent job of estimating the rental rates, but they do not have rental rates for every property. I am not sure why some do and some do not have the rental rates published.
Why are online house value not accurate?
Computer programs can determine the value of things like cars pretty accurately. Most cars are very similar, and it is fairly easy to see what values are based depending on the miles, condition, and options. However, houses are not produced on assembly lines like cars. Every house is different and located in a different market area, which changes the value. Because no two houses are the same, it is almost impossible for a computer program to accurately determine the value of a house. To accurately value a home, you need to have a local market expert who knows how to value houses and knows how much the location, condition, and design features will affect the value.
Even with online car values, you will see the value change drastically for the condition, miles, and options a car has. Even the color can affect what the value will be. You will see that almost all the online house valuing sites, whether it is Zillow, Redfin, or another, will have one value for a house. They will not consider the condition, the amenities, or the color of the house (which can affect the value). .
You can see the Zestimate change drastically when houses are bought or sold. I buy my houses well below market value, and when I purchase for much less than Zillow thinks the house is worth, you can see the values change.
The graph above shows how Zillow thought a house I bought was worth $160,000 but then lowered the price drastically after I bought it for $113,000. I got a great deal on this house because it needed some work and was a short sale. After spending $10,000 on repairs, it was worth $160,000 again or more. It took Zillow years before that value crept back up to what the home was actually worth. This is not Zillow’s fault because they did not know I remodeled the home or that I bought it well below market value. That is the problem with online values:, the computer does not know all the details that greatly affect value.
How far off is the Zillow Zestimate?
I went through each of my rental properties: what I bought them for, what I think they are worth and what Zillow says they are worth. I am holding these properties for the long run and have no plans to sell them. I am providing an accurate value for what I know these homes would sell for in our market right now. I have no reason to stretch their value as it does not benefit me since I don’t plan to sell them.
This first set of numbers is from 2013, and I will add updated numbers from 2019 to show if things have improved.
Rental property number 1
I bought my first rental property for $96,900 in December 2010. It was my first rental, and I got a great deal on the home. It is now rented for $1,100 a month. Zillow says the home is worth $145,797, and it should rent for $1,200 a month.
The rent is very accurate on this house, but my estimated value is about $170,000. If I listed it for $145,000, I would have five offers in the first two days and sell it for well over asking price. The current renters are at the end of their lease, and rents have been rising. I bet I could get $1,200 or more a month now if I was to rent it out again.
Rental property number 2
I bought rental property number two in October of 2011 for $94,000. I had to put $15,000 of work into it before it was rented, and it has been rented for $1,100 a month since then. I know this rent is low as I rent it to my brother-in-law. I could rent it out for at least $1,300 a month in today’s market.
Zillow’s Zestimate says this home is worth $151,000 and does not list a rent amount. If I were to sell this home, I could get at least $170,000.
Rental property number 3
I bought rental property number three in November of 2011 for $92,000. I put about $18,000 of work into it before it was rented, and it is rented for $1,250 now.
Zillow says this home is worth $165,000, and the rental amount is not listed (I am not sure why they list rent values in some, but not others). This value is much more accurate, and I would estimate this house is also worth right around $170,000.
Rental property number 4
I bought rental property number four in January of 2013 for $109,000. This home needed $15,000 in work before rented and has been rented for $1,300 a month.
Zillow estimates this home is worth $166,000, which is not too far off. I think this house is worth closer to $180,000 or maybe $185,000. It is larger than the other homes and has more amenities.
Rental property number 5
I bought rental property number five for $88,249 in December of 2012. This home needed a lot of work, and I spent about $20,000 on repairs before it was rented. It has been rented for $1,200 a month.
Zillow says this home is worth $90,000, and I think they value it so low because I bought it recently. My estimate for the value of this home is at least $155,000. This is a case where the Zillow value is way off.
Rental property number 6
I bought rental property number six for $115,000 in March of 2013. I put about $17,000 into it, and it is rented for $1,300 a month.
Zillow says this property is worth $132,000 and again does not list a rent value. I feel this home is worth $160,000, which shows another big difference in home values, possibly due to a recent purchase.
Rental property number 7
Rental property number seven was purchased for $113,000 in April of 2012. I put about $7,500 in repairs into this property, and it is rented for $1,400 a month.
Zillow says this home is worth $148,000 and does not list rent. This home is in a very hot neighborhood and is worth about $170,000 now. This was an awesome deal, and I wish I could find ten more like it!
Rental property number 8
I purchased rental property number 8 in November of 2013 for $97,500. I don’t have it rented yet, and I have not started any of the work on it either. I estimate it will take about $15,000 to get it ready to rent.
Zillow lists the home as being worth $130,000! I thought this value was very interesting since I just purchased the home for $30,000 less than what Zillow estimates it is worth. Zillow does list the recent sale prices, so they know how much it just sold for. Once this home is fixed up, I estimate it will be worth around $150,000, and it should rent for $1,200 to $1,300 a month. It is not fixed up yet, so I will leave my purchase price as the actual value since I just purchased it. I do like to buy properties below market value though, so it is worth a little more than the $97,500.
Should you trust Zillow values?
As you can see, Zillow values can vary widely on different properties. Zillow lists values on some of my homes very low and on one pretty high. Here is a list of all the values for Zillow and my estimate.
|Properties||My estimate||Zillow estimate||Difference||% difference|
Overall, I think Zillow does a good job of giving ballpark values, but do not depend on Zillow if you plan to buy or sell a home. The easiest way to get an accurate value on a home is to ask a local real estate agent to complete a CMA for you, which should cost you nothing. As you can see from the above values, many Zillow estimates are pretty close, but some are off by over 40 percent! I would hate to be the person that sells their home for 40 percent less than market value or pays 25 percent more than market value on a home. The tricky part is there is no way for someone to know which values are accurate and which are not.
Is Zillow more accurate now?
Here are some of the rentals I listed above and what Zillow says about them now
|Properties||My estimate||Zillow estimate||Difference||% difference|
You can see the values are not too far off, but they are not exact either. A $30,000 difference is a big deal for most people. These values assume the houses are in good shape and ready to sell. If they needed work, the values would be much different.
Is Zillow Sold information accurate?
I looked at some of my recent flip purchases and found an interesting property!
I bought this home for $154,000 in March (2 months ago), but Zillow shows it sold for $122,000. This is because this was a wholesale deal where I paid an assignment fee of $30,000 to get this deal. There is no way for Zillow to know this information, but they still use it to value the home and value it at $142,000. The property is actually worth $225,000 after we fix it up.
Zillow actually lists this home as a foreclosure and for sale! This is completely inaccurate information, and I have seen a number of houses listed as foreclosures that are not foreclosures at all. This house was in foreclosure, but that was stopped when we bought the house 2 months ago.
We sold another flip in March for $250,000.
This property was valued around $180,000, and we bought it for $175,000 a few months in July of 2018. When we sold the house for $250,000, Zillow said it was worth $182,000.
In some cases, Zillow can be accurate and in other cases, it can be way off, and not just with values, but with other information as well.
Alternatives to Zillow Zestimates (Redfin, Realtor.com)
There are other sites that list home values as well like Redfin and Realtor.com. I checked Redfin to see how they value the weird property that Zillow listed as being a foreclosure for sale. Redfin shows it as being worth $216,000 and not for sale.
I checked for the other property that I sold for $250,000, and it was more accurate on that price as well.
However, I checked on rental property number 1, and it shows it as being worth $265,000 which is much less accurate than Zillow and way below market value. I checked rental property number 2, and it shows the value as $217,000! That is almost $100,000 less than what it is actually worth! Rental property number 3 is way off at $246,000 and so on. So, Redfin may be more accurate for some properties and Zillow more accurate for others.
Realtor.com is different as well. They list number 1 as worth $265,000, number 2 as $273,000, and number 3 as $319,000. So you can see the sites can vary by huge amounts on what properties are worth, and this is why you cannot trust them.
What can Zillow tell us?
As I mentioned, it is hard to get accurate values from Zillow, but they do show recently sold comps in neighborhoods. Zillow also shows pricing trends, which tend to be fairly accurate in my opinion. That can tell you if prices are going up or down in certain areas. Zillow also lists homes for sale as well as local real estate agents. Overall, I think Zillow has a lot of great information, but don’t count solely on their home values.
If you want an accurate home value, you need to talk to a real estate agent. This is why agents are so valuable because they can prevent a seller from losing $50,000 by pricing their home too low when trying to sell on their own.