You have likely heard the term “Zestimate.” But if you haven’t, Zestimate is a registered trademark of Zillow and provides consumers with a value of their home. Note, I said A value, not THE value.
Many people don’t realize that Zillow is not a licensed real estate broker in any state. In fact, Zillow does not care that their data is inaccurate. They freely admit that their "Zestimates" are a range of values based on a mathematic formula. They are not an appraisal. They have no knowledge of local neighborhood boundaries or how one home’s luxury upgrades compares to a nearby scrape. Nor do they have any licensed real estate professionals that have ever been in your home or any home in your neighborhood. Accuracy is not their goal - their goal is to simply increase traffic to their website. Zillow does not exist to sell homes. Their business model is based on selling advertising on their sites to real estate agents. The more visitors they get, the more they can charge for advertising.
The following stats were taken straight from Zillow’s website and have mind-boggling results:
Nationwide, Zestimates are currently within 5% of the final sale price 55.5% of the time.
Nationally, Zestimates are currently within 20% of the final sale price 87.6% of the time.
Let me just spell this out…
According to the Denver Metro Association of REALTORS® (DMAR), Denver’s average home sales price in September of 2018 was $575,461.
So we determined that Zillow admits that they are on average within 5% of the sales price 55.5% of the time. First off, those are not good odds. But more importantly, 5% is a huge number in our market here in Denver, Colorado. To put this in perspective, by using the average sales price above, your home could be priced over or under by over $31,000! Let’s take it one step further, and base this off of their more vainglorious percentage which is when their Zestimate® is within 20% of the sales price 87.6% of the time. Using the same sales price, your home value could be placed at or within an astounding $115,000 difference of what it would actually sell for.
In case you wanted me to explain more about why that is bad…
A low Zestimate can certainly muddy that waters for home sellers by leaving money on the table, but high Zestimates can do even more damage for sellers if that is what they believe their home will actually sell for.
Homeowners with low Zestimates often dismiss them as inaccurate.
Many homeowners with high Zestimates tend to cling to that number and believe they’re accurate and holy. It is a common emotional response – homeowners fall in love with a high estimated value as they start thinking about what they’ll do with all that money. Overpricing is a very costly mistake, as buyers will not see the value compared to other homes in the area that were priced correctly. This leads to your home sitting on the market for months or even years, ultimately resulting to drastic price reductions after the listing goes stale.