What is a Zestimate?
Zillow offers a free feature called a Zestimate, where they can instantly provide you with the market value of a home. This tool is a great starting point. Zestimates act as a helpful and quick way to determine the overall value without performing an actual appraisal.
Zillow’s algorithm calculates the value using data from homes in the neighborhood or area. In addition, to obtain the estimated value, the algorithm gathers the square footage of the house from official tax records. The information gets measured against the most recent home sales in the area.
Keep in mind, the details used to compute the estimate are pretty superficial. As a result, a Zestimate cannot take into account factors like home improvement projects, updates, or new appliances or features.
How accurate are Zillow’s Zestimates?
Have you ever wondered, “how does Zillow calculate my home value?” We think it’s a common question, especially when the Zestimate is higher than the home’s appraised value. So how do you know what’s right? Are Zestimates truly accurate?
Places like Investopedia.com openly claim that Zestimates are “not as accurate as you think.”The formula Zillow uses bases the estimate upon user-submitted information, area data, and publicly shared information your location offers. Zillow claims “the median error rate for on-market homes nationwide is 1.9%, meaning Zestimates for half of all on-market homes are within 2% of the ultimate sale price”. For off-market homes, the margin of error is a bit wider at around 7.5%.
One explanation for flaws in Zestimates is that the algorithm doesn’t have all of the information on your home. The algorithm is limited to accessing tax records on the house to obtain the square footage and floor plan breakdown. As a result, there’s not much more information the algorithm can get. Leaving Zestimates to feed off of other home sales in your area and the overall shifts in the housing market.
Keep in mind that the details used to compute the estimate are pretty superficial. Their algorithm cannot pick up on factors like home improvement projects, updates, or new appliances or features.
How close is a Zestimate to an appraisal?
A home appraisal is an objective, third-party assessment of a home’s market value. It’s always based on recent sales of comparable homes in your neighborhood. An appraiser will consider your lot size, age and condition of the home, amenities, and other property characteristics both internally and externally. It’s much more focused and local as opposed to a Zestimate.
If you’re looking for a rough idea of your home’s valuation, that’s usually when you’d consider a Zestimate. Unfortunately, it’s rarely accurate on actual selling prices but (again) gets you within 80% accuracy. As a result Zestimates should be followed up with an in-person appraisal by a licensed professional. Until then, do not put a price tag on the property you might be looking to sell.
Why do people use Zillow’s Zestimate feature?
Maybe you have found yourself in a new part of town by accident. Or perhaps you are walking in a neighborhood with which you are not familiar and want to see the average selling price for a home. Undeniably, a Zestimate is an excellent tool for people starting the search process.
Especially if you are trying to determine if a neighborhood is in your price range or not. They will be able to quickly see housing prices to gauge home affordability in that area. Of course, while not perfect, this tool should be considered beneficial. Especially for people who are beginning the home hunting or home selling process to start formulating the next move.
For those considering selling their home, a quick and free Zestimate can help identify the house’s relative value reflected by the state of the market and other homes’ selling values in your area. This tool allows you to gain quick insight into whether or not putting your home up for sale will be worth your time and effort to do so. Of course, no one wants to sell their home unless they will benefit financially. Remember, the seller is the one who ends up paying the buying and selling agent’s commission fees. Naturally, a seller wants assurance they aren’t going to take a financial hit when putting their home on the market.
When does Zillow update?
The plain fact is that home values never stop changing over time as the valuation changes to reflect the status of the market and housing demand. Zillow states that “local market conditions are a better indicator of projected home value appreciation”. As a result, your “Zestimate” is updated regularly to keep up with fluctuating home values.” You can track Zillow’s updates in your Zestimate history over time to see these changes reflected.
Don’t be alarmed if you see your home’s value drop on your Zestimate. This most likely means that the market has temporarily shifted from a seller’s market to a buyer’s market. Accordingly, Zillow is adjusting for this market shift. Also, sometimes your Zestimate will change if the algorithm used to calculate the home’s value is updated.
We can tell you that the next move involves talking to a professional with confidence. For those starting the home buying process, talking to a real estate agent makes the most sense. You will have a lot of questions. A real estate professional will be able to not only answer them but point out things you may not have thought about initially. In addition, an agent has the tools and know-how to do a comparative market analysis. They will prioritize and help you find ways to improve your home’s value.
Home values are constantly changing, and the housing market in Colorado is becoming increasingly competitive. Talking to an agent will help to ensure that you get the maximum asking price for your home.
If you are interested in finding out more information before deciding to buy or sell in Colorado, don’t hesitate to reach out to the experts at American Home Agents by calling (303) 695-5900. Our agents are in the know, savvy, and driven, making your job as simple as getting in touch to get the process started. We look forward to speaking with you and helping you on your exciting home journey!