As a Realtor, I take great pride in my ability to accurately determine the value of a listing (in 2016, our listings sold for an average of 99.0% of their Original List Price), Zestimates are the bane of my existence. According to Zillow, “The Zestimate® home valuation is Zillow’s estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home’s value. The Zestimate is calculated from public and user-submitted data, taking into account special features, location, and market conditions.”
The problem for Realtors is that the public often anchors their opinion of a home’s value off of a Zestimate using it as the basis for setting a list price when selling a house or offer price when buying. I prefer to refer to them as Zestifails because they are often wildly inaccurate. Zillow even publishes Zestimate Accuracy information that confirms how bad they are. They currently claim that for the Atlanta metro area, Zestimates are within 5% of the sales price 51.7% of the time (see published table below for recent accuracy information).
How accurate are Zestimates for the Sope Creek Market? My research shows that on average, Zestimates for sold properties are off by an average of 14% during 2016! My accuracy research also shows they were within 5% of the final sales price only 24.2% of the time, within 10% only 51.6% of the time, and within 20% only 73.6% of the time! This means that more than a quarter of the Zestimates for Sope Creek homes are off more than 20%! Zestimates are a two way street…55 of the 91 (60.4%) were 5% or more ABOVE the final sales price and 14 of the 91 (15.4%) were 5% or more BELOW the final sales price.
Zillow had a major Zestifail for 275 Dickerson Road. On November of 2015 the Zestimate was $619K, it listed on 2/15/16 for $975K, and then went under contract in 8 days for $967.5K. At the time of this post the Zestimate value is still way off at $678,391.
The greatest Zestifail I came across was for 4512 Chattahoochee Way in Chattahoochee Plantation. The Zestimate value on 8/31/16 was $799K, it was listed that day for $500K and sold 7 days later for $451K. Zillow was off on the value by a little more than 77%! They have since adjusted the value to $717K despite the fact that a flipper has been trying to sell the house with updates since 12/2/16 and currently has it listed for $675K.
How can Zestimates be so wildly inaccurate? Based on my observations, Zillow probably calculates Zestimates using tax record information, past sale data, recent sales from the surrounding area, and some form of a home price index. A variable from the tax records like property ZIP probably has more weight in their formula than an elementary school district (school districts are not referenced in the tax records and I suspect have no weight on the Zestimate formula). On top of that, Zestimates don’t have condition information for properties, level of finish information, and can’t factor in other improvements not noted in the tax record.
For an area like Sope Creek Elementary district (rated 10 out of 10 on www.greatschools.com) where the large majority of the homes are located in 30067, Zestimates are more likely influenced by other sales in 30067 than by other Sope Creek Elementary sales located in 30068. 30067 also includes Powers Ferry Elementary (2 out of 10), Brumby (4 out of 10) and Sedalia Park (6 out of 10). The median price for all homes sold in 30067 in 2016 was $330K while the median price of all homes sold in Sope Creek Elementary was $530K. Do you think ZIP or school district is a bigger influencer on value?
If you are planning on buying or selling a home, you should use a Zestimate as a barometer to monitor where values are going but it is more important to consult a Realtor who can accurately assess the value of a home and negotiate the best price for you. Call us at 770-676-1786 for a complimentary market evaluation. If you have questions about my research, download my Zestifail White Paper.