What is a Zestimate? | How it's calculated | How to get a more accurate home value
Zillow is one of the leading real estate websites in the US. One feature it's known for is its Zestimate, which offers property value estimates.
A Zestimate isn't intended to replace more accurate valuation methods like an appraisal or a comparative market analysis.
How accurate is a Zestimate?
| Type of home | Median error rate |
|---|---|
| On-market | 2.4% |
| Off-market | 7.5% |
Zillow's Zestimates are intended as estimates. The company says the median error rate for Zestimates is 2.4% for on-market homes and 7.5% for off-market homes.[1]
The accuracy of Zestimates varies based on location and the availability of local data. The more publicly available data in a given area, the more accurate the Zestimates in that area will be.
Zillow publishes its data coverage and estimated margin of error for specific areas. For example, the median error rate for off-market homes in Colorado Springs is 4.4%, but in Cleveland, it's 10.3%.[1]
A Zestimate's accuracy also varies based on the constitution of the town or neighborhood where a property is located. If a home is situated in a new development, particularly one with similarly priced homes, it will probably be fairly accurate. However, if you live in an older neighborhood full of homes with unique features, those factors can throw the algorithm off.
What is a Zestimate?
A Zestimate is Zillow's estimated market value for a home. Zillow has calculated Zestimates for around 100 million US homes.
Estimator tools are a good starting point to determine your home's value. Knowing your Zestimate can be helpful, but you'll want to compare it with estimates from other top home value estimators.
How is a Zestimate calculated?
Zillow Zestimates are automatically calculated using a proprietary formula that merges data from several sources, including public data and user-submitted information.
| Type of data | Examples |
|---|---|
| Home characteristics | Location, square footage, number of bathrooms, special features and amenities |
| On-market data | Listing price, description, days on market |
| Off-market data | Tax records, age of the home, what the home sold for previously, appraisal values |
| Market trends | Seasonal changes in buyer demand |
The company uses this information and the same information for homes in the surrounding area and combines it with data it receives from homeowners to come up with approximate valuations for real estate.
Zestimate pros and cons
Pros
- It's free and easy to get a Zestimate.
- You can get an estimate of your home value without going through a professional.
Cons
- Zestimates aren't always accurate.
- The algorithm can miss important factors like home improvements.
There are a lot of ways that Zestimates can help both current and prospective homeowners. A Zestimate is free and easy to obtain and allows people to look at an estimated value of a home without having to go through a professional.
Home value estimators like Zestimate have become a lot more accurate in recent years, but they aren't a substitute for more accurate valuations. If you're thinking about buying or selling property, a Zillow Zestimate is a great place to start.
A Zestimate's main negative is that it's entirely calculated using artificial intelligence. Buying a home is a personal decision, and there are a lot of variables that can't be quantified. There are many factors specific to a property or locale that Zillow isn't privy to.
With current technological limitations, an AI system like Zestimate is bound to miss some factors, like recent home renovations, and sometimes those factors significantly affect the value of a home.
More accurate ways to determine your property value
Get a comparative market analysis
A comparative market analysis (CMA) is one of the most effective ways of evaluating a home's market value.
To conduct a CMA, a real estate agent compares a property and all of its features to similar current, expired, and sold listings in the area. With this information, they can get a good idea of what local buyers will pay.
Home value estimators are a good starting point to gauge your home's worth. But when you're ready to get a more accurate home value estimate, work with an experienced local realtor. A real estate agent who is on the ground in a community is in the best position to know how much a property is likely to sell for.
Whether you're a prospective buyer or seller, a free service like Clever Real Estate can connect you with top local agents who conduct expert CMAs.
Get an appraisal
An appraisal by a licensed appraiser is another way to calculate what a home is worth. Appraisals are commonly used by state and local governments to determine the property tax rate and by mortgage lenders to ensure a home is a good investment.
Appraised value and market value are not the same thing. The appraised value of a home can differ from its market value, particularly in a fast-moving market. If a location has a high demand and low supply, an appraisal may not accurately reflect how much prospective buyers will pay.
