When people first start thinking about buying a home, one of the first places they check is on Zillow. This is a website that lists homes for sale in cities, states, and all across the United States. One of the sites most beneficial tool is its “Zestimate,” which provides an estimate of a home’s current market value. Even though this is a useful tool, there are still several questions about whether it accurately gives an estimate of a house. Therefore, the question is, can you trust Zillow?

How Zestimate is calculated

First, let’s discuss how Zillow’s Zestimate is calculated. While Zillow doesn’t reveal their exact methods for calculating home price estimates, they do try and be transparent as possible about their process, continually reiterating that these estimates are not 100% accurate.

What we do know is that the calculations that go into the Zestimate are recalculated every day and they are based on public data along with user-submitted data. For example, public recorded data will tell Zillow how many nearby houses are selling for, and user-submitted data can tell them about the specific characteristics of the home such as; whether it was recently remodeled and how many bathrooms it has. Zillow also knows how quickly homes in that area are selling, and whether they are selling above the asking price. The company uses a sophisticated algorithm that incorporates all kind of data to arrive at a single estimate of a home’s cost.

Why Zillow is sometimes Inaccurate

While Zillow is very sophisticated, the only thing they can do is create an estimate of prices. Every house is different, and Zillow can’t possibly know all the logistics that go into every home. So, it’s entirely reasonable for people to assume their estimates are inaccurate. According to Zillow’s website, their median error of the Zestimate tool is 4.3%. This translates to Zillow’s estimates are within 4.3% of the value of the house about half the time.

Also, they say on their website that their Zestimates are within 20% of the sales price 86.9% of the time. It’s important to side note here that 20% of a home’s sale price can potentially mean tens, hundreds, or even thousands of dollars in a difference of price.

In conclusion, Zestimate serves as a starting point, which can give you an idea of what a house’s price might be. However, it should never serve as the end of the housing conversation but the beginning. If you’re a home buyer and notice a house with a wide discrepancy between the Zestimate tool and the home’s listed value, talk with your real estate agent for advice on how accurate they think the price estimate is. When in doubt consult with a licensed real estate agent if you have any questions or concerns about a potential house’s asking price.