What Do I Think of Zillow?

I was asked that question recently at a novice homebuyer's seminar. I gave a rather luke-warm answer, because I really only had my anecdotal experience to pull from. I know that they get their information from county records and that they use information about recently sold property to update that information. I know that Zestimates can sometimes be pretty accurate and sometimes pretty inaccurate.

Well today I came across an article by James R. Hagerty in the Wall Street Journal Online. The Wall Street Journal did an analysis of 1000 Zestimates for homes in 7 states and found out what I already knew from experience. But the interesting thing is that they have hard data. Granted they only sampled 1000 homes, but given their results are similar to my expectations confirms that my gut sense is correct. Zillow was pretty darn close for about 1/3 of the estimates. The rest of the estimates were pretty equally split between those that were too high and too low. 11% of the time it was off more than 25%. Zillow was off more than 50% for 34 of the 1000 transactions reviewed.

There are a number of reasons for this. First, the Zestimator never visits the property. Zillow does not know if the home has been extensively remodeled or recently burned to the ground. Zillow does best in neighborhoods where all the homes are substantially the same and there are a number of recent home sales to support their estimates. In neighborhoods were there is a great variation in the style or size of homes or in rural areas, Zillow is less likely to be accurate.

Zillow is the first to say that their Zestimates are a starting point. I like to use Zestimates to look at property in other states or communities where I am unfamiliar with neighborhoods or property values. It gives me a clue about whether I'm looking in the right place or barking up the wrong tree.

For any tool to perform well you have to know what it is good for and how to use it. It is the same with Zillow. Proceed with caution and have fun!