Zestimate Tool: Calculating Your Property’s Worth

Zillow is an extremely popular and reliable real estate website that has changed how people buy or sell their homes. The website is definitely the go-to place for a majority of people looking to get into real estate. There isn’t anything quite like Zillow in the market. 

Not only does Zillow have a long and detailed list of homes and properties for sale or rent all across the country, but the real estate giant also has its iconic Zestimate. This is the key feature that really makes Zillow so helpful to its users. The Zestimate tool allows people to get an idea of the proprietary estimate of a specific property’s current market value. 

However, since real estate is such a fastidious business, there have been questions raised about the accuracy and reliability of Zillow’s Zestimate People want to know how it works and how precise the figures the tool provides. What factors does the tool consider when they calculate the home value? Who exactly does all the calculating? These are the questions that most people want to know the answer to before they fully commit to the Zestimate tool. 

In this article, we will take a closer look at Zillow’s most popular feature to get a better understanding of the real estate tool.

Zestimate: What It is and How It Works

According to Zillow themselves, a Zestimate is not and shouldn’t be considered as an appraisal. A Zestimate is actually calculated using a proprietary formula base from the public and user-submitted data. It considers factors such as market conditions, special features, and location. An appraisal, on the other hand, comes from the opinion of a licensed professional who is not involved in the sale. In fact, Zillow recommends users to get an official appraisal as a supplement to the Zestimate. 

A Zestimate is a computer-generated calculation of how much a certain house is a worth based on the data currently available. Basically, it’s merely a starting point for users to consider when venturing into the real estate world. 

As for how it works, Zillow can’t fully share their entire process to safeguard the company, but they do try to be as transparent as they can and give users a general answer. The Zestimate is calculated by a computer using software designed by Zillow’s statisticians. No part of the process is done manually to ensure that the result is as free from alteration and manipulation as it can be. 

While the public will never know of Zillow’s exact formula, Zillow has gone on to say that there are several factors that their algorithm takes into accounts such as the physical description of the property (the size of the lot, location, number of rooms and their designations, etc.), tax assessments (usually found in the tax assessor’s records), and past and present transactions. The Zestimate also considers how quickly neighboring homes are sold and the asking price of each home. 

Just as with all features, the Zestimate’s sophisticated algorithm is being improved every day. Zillow employs a team of the best statisticians to make sure that the Zestimate grows more accurate. 

Zestimate’s Overall Accuracy 

There have been complaints of Zestimate showing inaccurate results and Zillow themselves have admitted that the feature isn’t always 100% accurate. No matter how advanced and smart Zillow’s algorithm is, at the end of the day, a Zestimate is just an educated guess as to how much a specific house is worth. One can’t truly expect Zillow – or any company – to know every minute detail of a house that could raise or lower its value. All the real estate can do is take the data provided by the user and by the public and come up with a rough estimate.

Zillow has stated that the Zestimate’s accuracy largely depends on the location of the property and the data available for that specific area. Some areas have more details and data to provide than others, that’s why some people find that their Zestimates are considerably off the mark. 

Meanwhile, experts have written that it’s just impossible for any type of automated software process to predict the value of a house accurately. There are houses or properties too unique or don’t provide the right data which could throw off the Zestimate algorithm. Here are a few other factors that could negatively affect one’s Zestimate:

Errors in Tax Records or Sales Price

Property taxes, tax exceptions, and the like are publicly available data so the Zestimate feature can easily acquire them. However, one should take note that sometimes tax assessor’s property values can be inaccurate or erroneous, maybe because of a mistake in the database or some other glitch. 

Moreover, in certain cases and areas, the date and price of the last sale of the house largely affect the Zestimate. If one made a mistake in the figures, not only will one’s home’s Zestimate be inaccurate, it could also affect one’s neighbors’ Zestimates. Zillow compares prices in the area, so it’s vital that one take extra care when providing the figures a Zestimate needs.

Unaccounted Home/Property Improvements and Features

Zillow can’t possibly be aware of all the upgrades and improvements on one’s home, not unless the local property tax assessor is informed about them. Large-scale upgrades typically require city permits so property tax authorities will know and will include it in the public database. However, in certain renovations that don’t require permits, Zillow will have no way of accessing that information and will be unable to include it in the algorithm. 

It’s advised that one update all of the home’s amenities and upgrades in one’s Zillow profile.

Local Real Estate Market

Lastly, Zillow takes into account how many home sales are in one’s area and the housing turnover rate. If one’s area has recently experienced a lot of real estate sales, Zillow will know how much buyers were willing to pay for the neighboring houses, which is more data that could help one’s Zestimate be more accurate. Urbanized areas usually have the advantage since more people are buying properties in the cities while rural areas might experience it a bit of a challenge in getting a realistically accurate Zestimate.