How Accurate are Zillow's Estimates? - Orchard (2023)

Zillow is a popular online real estate platform perhaps best known for providing “Zestimates,” or, estimations of a home’s value. Zillow calculates Zestimates using a proprietary algorithm that analyzes various factors such as location, size, age, and recent sales of comparable homes in the area.

While Zestimates can be a useful starting point for homeowners and buyers to get a sense of a property's value, they are subject to inaccuracies. Homeowners and buyers should use Zestimates as a general guide, and consult a licensed appraiser for a more accurate and unbiased estimate of how much their home is worth.

What is a Zestimate on Zillow?

A Zestimate is an estimated market value for a property, calculated by Zillow’s proprietary formula that takes into account various factors, like:

• Location of property
• Size of property
• Age of property
• Condition of the exterior of the home
• Recent sales of comparable homes in the area

Many homeowners use Zestimates to valuate their homes; however, a Zestimate is not an official appraisal of a property. The formula is unable to account for other factors that can have a significant impact on home value, like:

• Condition of the interior of the home
• Upgrades or renovations
• Unique features or amenities
• Recent fluctuations in market conditions

As such, a Zestimate is only a starting point in determining a home's value. The only way to determine your home’s true value is to get a professional appraisal.

How does Zillow estimate home value?

You may never have questioned the number that pops up after typing in your address to Zillow’s home valuation calculator, but how does the process work? It starts with a proprietary algorithm that pulls data from public property records, tax records, recent home sales, and user-data. The algorithm analyzes these factors and incorporates machine learning for added accuracy.

The process has three steps:

1. Data Collection: Zillow’s algorithm gathers data on the property, including its address, square footage, number of bedrooms and bathrooms, and other relevant features from public records and user-data.
2. Home Value Modeling: The algorithm uses this data, along with information on recent sales of comparable homes in the area, to create an automated valuation model (AVM) that predicts the property's value.
3. Refinement: The algorithm refines the statistical model based on new data and user feedback, in order to improve accuracy over time.

Related: Here are 10 alternatives and competitors to Zillow

How does Zillow measure accuracy?

Zillow boasts that for most major markets, Zestimates are within 10% of the final sale price of on-market homes 95% of the time. They also report that Zestimates have a nationwide median error rate of 2.4% for on-market homes and 7.49% for off-market homes —eaning that half of all homes are within the error rate, and the other half are not.

As you can see, there is a wide range of variability in Zillow’s estimates, so what influences whether or not your Zestimate is reliable?

What impacts Zestimate accuracy?

Zestimates are dependent on public data and records and therefore, subject to inaccuracies. For example, in a neighborhood where a home hasn’t been for sale in many years or fewer home sales in general, recent sales prices will be out of date, skewing the Zestimate.

While Zillow states that Zestimates are within 10% of the final sale price of on-market homes 95% of the time for most major markets, the error rate can be significantly higher for non-major markets and more remote locations. If you live in a small, obscure town, the Zestimate on your house is more likely to be inaccurate than if you lived in a major city.

Zillow provides a "Zestimate Accuracy Table" on their website, which shows the median error rate for Zestimates in different states and counties throughout the United States. Homeowners and homebuyers should use this information to get a sense of how accurate Zestimates are likely to be in their local area.

What’s the most accurate home value estimate?

While a Zestimate may satisfy your curiosity, it won’t satisfy your lender when determining whether or not your home is adequate collateral for a loan. So if you need an accurate home value, like when applying for a home loan, you’ll need to hire a licensed appraiser.

Your appraiser will physically inspect the property, take into account its unique features and condition, and use comparable sales in the area to arrive at an unbiased and accurate estimate of the property's value.

However, professional appraisals can cost as much as $300 to $400 and are typically only used in specific situations, like when a home is being bought or sold, or when a homeowner is refinancing their mortgage. Consulting a real estate agent can also be more accurate than a Zestimate. Just note that agents will give you the market value — or, how your house could sell for — which is different from the appraised value of your home. If you need an official valuation, you’ll have to hire a professional appraiser.

For homeowners and buyers who are looking for a free and convenient way to get a sense of a property's value, online valuation tools are often adequate. But not all tools are created equal. For example, Orchard’s free online home valuation — our estimates are 30% more accurate, thanks to a patented AVN model, which you can read more about here.

FAQs

Here are some more details about the accuracy of Zillow’s estimates.

Is Zillow Zestimate usually right?

Zestimates are mere estimates of a property’s value, not a true valuation. As such, you can expect your Zestimate to be around your home’s value, but don’t expect it to be exact. Additionally, if your home is in a remote area or there haven’t been recent home sales in your neighborhood, the Zestimate is likely to be more inaccurate. That’s because the algorithm can’t conduct an accurate comparative market analysis — a crucial step to valuating a home.

Are Zestimate usually higher or lower than others?

Zillow's Zestimate can be higher or lower than other estimates of a home's value, depending on the specific property and the local real estate market. The company itself acknowledges that its Zestimate is not always accurate, and it provides a range of the estimated value as well as a "Zestimate Accuracy" score for each property. These tools can help provide more context for your Zestimate, and help you determine if it’s on the higher or lower end of the range for your home.

Why is Zillow Zestimate inaccurate?

The most common reasons for inaccurate Zestimates are limited data, market volatility, and data errors. It’s important to remember that your Zestimate is only an estimate based on a proprietary algorithm and the information it's fed. If there are inaccuracies in that data, the Zestimate will also be inaccurate.

What are some alternatives to Zillow's Zestimate?

There are many other online home estimators. Read the fine print of these valuation tools to understand if they are a reliable source of data for your neighborhood or not. When in doubt, consult a professional. You can also get an free estimate of your home's value with Orchard. Get started.