Zillow is one of the most popular websites and apps to find information on homes for sale. Founded in 2006, Zillow is a real estate database that lists information about millions of homes all across North America. Users of the service can even search an area for information using criteria such as price, square footage, the type of home, or any number of listed amenities.
One of the big draws to Zillow is the estimate that it calculates for how much any particular home is worth. These numbers come from public sales data, as well as comparable homes. Currently, Zillow provides estimates of value on about 100 million homes across the US. While they can be relatively handy in finding a starting point for home valuation, there are a number of reasons why they may not be correct for a significant number of homes.
1. Garbage In, Garbage Out
Zillow uses complex algorithms to keep its estimates updated and as current as possible, updating them three times a week. But this is based on both publicly-submitted data, and publicly available information. By their own account, Zillow estimates are within “10 percent of the selling price of the home” but that estimate is only as good as the data behind it.
If incorrect information has been listed on the website, that can continually affect the integrity of the estimates. While users can correct this information, the updated estimate may not be immediately visible. Sometimes the change simply isn’t significant enough to change the price.
2. Mistakes In Important Figures on Zillow
Since the price of the most recent sale is part of the determination of the estimate, but if that information is inaccurate, the resulting estimate will be off as well. Zillow does take into account the taxes that are paid, but the tax assessor’s values can be flawed.
3. Old Information On Zillow Not Reflective Of The Current Home
The homeowner may have made some significant improvements to the home, but Zillow may not be notified until the next tax assessment. This can derail the estimates in the meantime, meaning they can be off until the following year. This can be a fully remodeled gourmet kitchen that adds $40k to the value of the home, but since it didn’t need a permit there isn’t a tax record. It can also be the added bedroom that needed a permit and has a tax payment on file.
4. Turnover Rate Affects Accuracy, In A Good Way!
Since a large part of Zillow’s data comes from home sales and tax records, if there has been a number of home sales in your immediate area, they may have an abundance of data. This means your Zillow-generated estimate has the potential to be much more accurate.
For example, if you live in a hot Florida suburb, you may see a high rate of turnover, while in rural areas people tend to stay in their homes for many years, even several generations. It is highly market dependant.