The Real Problem with the Zestimate

Once upon a time, real estate agents sent mailers to homeowners with a headline that had some version of, “What’s your home worth?” It’s a pretty powerful question, because the answer is typically the information that a homeowner wants to know above all else—and only an agent could provide it. To further entice the homeowner, these mailers typically offered a free, no-strings-attached evaluation, opening the door to the kind of dialogue that would often result in a listing.

Fast forward to our modern era, when Zillow effectively hijacked this strategy with its Zestimate. Catchy, right? Now, homeowners have a DIY approach to the value of their home, without even getting off the couch. But removing the real estate agent from the equation tends to do more harm than good. Here’s the real problem with the Zestimate.

Algorithm Fails

Here’s how Zillow describes its own tool: “The Zestimate is calculated through Zillow’s proprietary algorithm that crunches data from public property records, tax records, recent home sales in the area, and user-submitted information to come up with an approximate market value for a home.”

Already, a few issues become clear, and home condition is one of them. Public property records, tax records, recent home sales, and all the rest of it don’t count for much if the inside of a home is a complete wreck. Still, judging by its popularity, consumers really want to believe what they read online. That’s especially true when the market is red hot and home values tick ever skyward—it’s gratifying to look online and be told your home is worth thousands more than it was yesterday.

Zillow is quick to caution users that its Zestimate is merely a “tool” for “sizing up your home’s market value.” But in the next breath, it’s also claiming incredible accuracy. The fact is, the valuation from an experienced real estate agent is almost always going to be more accurate and more valuable, simply because this figure encompasses multiple data points in addition to the agent’s own expertise, experience, and localized insights.

The best takeaway is this: pricing a home isn’t just about valuation. It’s about strategy. And Zillow hasn’t figured out an algorithm for that just yet.  

Looking for the best strategy for buying or selling in Reno, Nevada, or the San Francisco Bay Are? You know where to find me. 

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