"Did you see what Zillow says our house is worth??" I'm a real estate broker so you might assume that comment came from a client. But no, it was my husband gushing about the latest uptick in our home's value. Come on hubby - I've told you many times not to hang your hat on that number.
Home owners should be circumspect when it comes to these statistics. The Zestimate (Zillow's estimate) was a game changer when it was first introduced. Listing appointments were met with sellers waving these figures at us. Now, more home owners understand that it's a flawed tool, but as my husband's example shows, it still foments excitement.
What are Zestimates based on? On their site, Zillow explains ". . . home valuation is Zillow's estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home's value." A starting point is fine, I can live with that.
Not too long ago, our local Multiple Listing Service (MLS) began displaying their own home values on every property in the data base. They gave a firm figure, plus a range. In my opinion, the range is a safety net, but nevertheless, it's there. But how does it compare to the Zestimate?
The analytics company, Core Logic, supplies the home valuations in the MLS. Depending on the area, home valuations use at least 90 closed sales in closest proximity to the subject. And that is just one of the valuation models they use - in the end, they employ several different kinds of information and then reconcile the values.
So how do Zestimates and MLS values compare? Here is a random list of five North Shore homes with both valuations listed:
|MLS Valuation||Zillow Zestimate|
|1--9 Chatfield Road, Winnetka||$914,113||$1,187,678|
|1--4 Pawnee, Wilmette||$964,082||$1,095,910|
|1--4 Oak Ridge, Glencoe||$509,488||$518,000|
|3-0 Abbotsford, Kenilworth||$1,564,016||$2,242,016|
|2-1 Latrobe, Northfield||$466,668||$379,144|
This is not an in-depth study - just 5 random homes chosen and compared. With the three most expensive homes, Zillow's estimate is fairly high. On the other hand, the two lower end homes are fairly close.
So what does all this mean. As a real estate friend of mine said, you still need a "sentient" being to come into your home and give you a hands-on appraisal. Zestimates are good for say, following a trend. If your home is always going up in price, the exact number is probably off, but the trend in upward value would be correct.
Have fun playing around with it, but don't hold that number too close to your heart when discussing prices with your real estate broker.
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Filed under: Real Estate