Whether you've been in the market for a home, sold a home, or just wanted to know the value of your home (or snoop on a neighbor's), you've probably turned to the popular real estate website, Zillow. Founded in 2006, Zillow is one of the top websites today to look at homes for sale by agent or owner and find local lenders and agents. One of the features of Zillow is their Zestimate, an estimated home value tool that predicts home values down to the dollar. Zillow boasts its Zestimate can predict your home's value with a median error rate of 5%. But can Zillow really predict home values accurately? We decided to put the Zestimate to the test.
For our experiment, we looked at 5 randomly selected homes that sold between April 2, 2019 and May 3, 2019 in Cache Valley and compared their sale price to the Zestimate listed. We have withheld the exact address since we did not have the home owners permission to post their sale price. Here are our results:
Our first home was from the southwest area of Logan in the zipcode 84321. It sold for $231,900 and it's Zestimate is $244,900, a difference of about 6%. This difference may be attributed to the fact that the Zestimate has 237 more square feet in this house than the listing.
Our second home was in Smithfield. It sold for $325,000 and it's Zestimate is $358,512, a difference of about 10%. What's crazy is Zillow didn't know that this home's basement was finished. This Zestimate was high without even knowing there was another 2100 finished square feet in the house!
For our third home we jumped further south and landed on a home in Hyrum, Utah. All the information for this home on Zillow matched its MLS listing, but the price was off about 11%. The home sold for $276,500 while its Zestimate says it should be worth $308,991, a whopping difference of $32,491!
Our next house was an older home in Wellsville, Utah, built in the early 1900's. Its sale price and Zestimate were the closest so far. This charming home sold for $151,000 while its Zestimate says it's worth $158,551, a difference of 5%.
We decided to use a townhome for our fifth home, and this was the closest Zestimate to sale price comparison. This townhouse in Providence sold for $194,000 and its Zestimate says it should be worth $197,150., a difference of only 2%. We decided to check and see if twin homes and town homes are closer than stand-alone homes to their Zestimate. We randomly selected a twin home, this time in Smithfield. Sure enough, the home sold for $170,500 and its Zestimate is $176,864.
We can see from these homes that the Zillow estimate overestimated the home's value every time (although it was more accurate with townhomes and twin homes). The median error for our data was 6%, pretty close to Zillow's 5%, with data ranging from 2%-11%. Depending on the price and location of the home, this difference could be anywhere from a few thousand dollars to tens of thousands of dollars! Even an error of only a few percent can be the difference between pricing your home to sell for the best amount quickly, or sitting on the market for months and months because it is overpriced.
So why were the values so different?
There are three main reasons the Zestimate for homes in Utah is not an accurate predictor of home value.
- Utah is a non-disclosure state. This means when a home sells, the actual sale price of the home is not listed in public county records, where the information for home valuation is pulled from.
- Information in Zillow may be inaccurate or outdated, including square feet, bedrooms, bathrooms, etc. We saw this in 2 of the 5 homes listed above. In one, the square footage was higher in Zillow, and in the other the basement was not included in the square footage.
- Zillow does not have a way to see the condition of the home. The algorithm used by Zillow uses the information it can get from public records to try and predict the value of the home (including square footage, bedrooms, lot size, etc.), but it cannot see if that large square footage is covered by a roof that needs to be replaced, or if that older home has been totally renovated. These kinds of factors greatly influence the value of the home.
How do I find out the value of my home?
In the state of Utah, the most reliable sources for estimating home value is to find out what similar homes in the area sold for recently. Since Utah is a non-disclosure state, this information can only be found on the Multiple Listings Service (MLS), a service that only Utah licensed appraisers and Realtors have access to. A trusted local agent can conduct a Comparative Market Analysis (CMA) to give you the best estimated value of your home. Please also remember that in Cache Valley, the Zillow estimate will likely be higher than the amount written on your CMA.
Want to know the value of your home?
If you live in the northern Utah area and want to know the estimated value of your home, call White Pine Realty at 435-465-8550. Our agent will conduct a CMA, explain the current market and price shown in the results, and help answer any questions. We also have some great information and tips to help you sell your home! No contract. No pressure.
Photo credit: David McBee