Pricing homes to sell is an art. But with tools like Zillow home values, you might not need to wait around for a realtor. You might not even need help in figuring out a selling price for your property.
Table of Contents
- What Is Zestimate?
- Can Zillow Give an Accurate Estimate of Home Value?
- Benefits of Using Zillow Home Values
- Drawbacks of Using Zillow Home Values
- Should You Use Zillow Home Values?
- How to Accurately Price Your Investment Property
While it seems like it would be a fast way to price your home and sell it quickly, there are some downsides to using Zillow home values. In this article, we’ll look at both sides of the story so you can decide whether or not you should use Zillow home values (Zestimates) when pricing your investment property.
What Is Zestimate?
Zestimate is Zillow’s estimate of the current market value of a home. It’s calculated by taking publicly available information about a home and using an algorithm to come up with a figure that reflects the value of the home as it stands today.
It is a starting point for home buyers and sellers to understand what a home is worth. It’s not an appraisal and it’s not an offer to buy or sell a home. To get an estimate of a home’s value, Zillow takes into account the prices of comparable homes in your neighborhood, as well as the local market conditions.
Zillow currently estimates prices for over 104 million Zillow homes for sale. The company’s data provides interested buyers or investors with comprehensive Zillow home values by address across the US housing market.
Can Zillow Give an Accurate Estimate of Home Value?
Is Zillow accurate for home values? If yes, how accurate are Zillow home values? According to the company, its national median error rate for on-market homes is 1.9%. It means that Zillow’s estimated prices for houses for sale listed on its website would show an average error rate of about 2%.
Zillow’s home value estimates are based on a combination of publicly-available data and proprietary algorithms. The public data includes information from local governments, tax assessors, county records, and other sources.
The proprietary algorithm considers a variety of factors in order to predict the market value of homes in the area, such as square footage, the number of bedrooms and bathrooms, lot size, age of the home, nearby amenities like schools and parks, and more. The more information that is available, the more accurate the Zestimate value.
Is Redfin More Accurate than Zillow?
Nationally, Redfin home value estimates are less accurate than Zillow. However, their accuracy varies from city to city and state to state, and Zillow home values by zip code are less accurate in some neighborhoods. While Zillow’s national median error rate is 1.9%, Redfin’s national median error rate is 2.57%.
Related: The Top 5 Real Estate Investing Websites for Making Money in 2022
Benefits of Using Zillow Home Values
Using Zillow home values provides the following benefits:
1. A starting point for determining a home’s value
Zestimates offer a reliable starting point for determining a home’s value. They are a convenient way to get a general idea of the value of your home. That’s where Zestimates come in. They’re like an online version of the pricing system that realtors use—but they’re free and available to anyone with an internet connection.
The Zestimate data is updated frequently and uses proprietary algorithms to calculate its estimate of a home’s worth. The accuracy of the estimates can increase over time as more data is incorporated.
2. A home value comparison feature
Zillow offers a home value comparison feature that allows you to compare the price of your home to similar homes in your area. You will be able to determine how it compares with the average price of homes in the area. This makes it easy to see if the value of your home has increased or decreased since you bought it.
The feature is designed to help potential buyers and sellers make informed decisions about whether they should buy or sell, or whether they should invest in improvements that might increase the value of their home. You can also use the comparison feature to track how much appreciation has occurred in your neighborhood, so you don’t get caught off-guard by rising prices.
3. An evolving proprietary algorithm
Zillow’s proprietary algorithm is constantly changing to adapt to the real estate market. The algorithm came into fruition with Zillow’s launch in 2006, evolving significantly over time.
The algorithm is trained to use millions of home valuations across the US. It uses an extensive set of data from local public records and information about recent sales in order to estimate the selling price of a home in the past.
The Zillow home value estimator also uses more than 750 million data points provided by users who share information about their own homes, such as square footage, number of bedrooms and bathrooms, etc.
4. Adjustable estimates
Zillow provides an estimated value for every home. The estimate is based on the data you provide and then adjusted to reflect what the company thinks is a more accurate figure.
Information like square footage, number of bedrooms, bathrooms, location, tax documents, and other data are used to determine the initial estimate of a property.
The estimates are adjustable with Zillow. With more information, the company is able to provide more accurate and adjustable estimates for every home. The more information available, the more accurate home values on Zillow will be.
Drawbacks of Using Zillow Home Values
Along with the benefits, using Zillow home values comes with the following drawbacks:
1. High error rate for off-market homes
Zillow home values come with a high error rate for off-market homes, which comes at a national median error rate of 6.9%. Unfortunately, it means that many off-market homes are valued at a lesser price than they should be, which gives buyers an inaccurate impression of their buying power.
It happens because there is no data on a home since the owner’s not submitted it to the site. Therefore, Zillow will estimate the home’s value based on comparable nearby homes. It means that you won’t know what your home is truly worth until you put it on the market.
Related: Zillow Rental Estimate: How Accurate Is It?
2. Doesn’t factor in upgrades to the property
Zillow is an excellent tool for researching the value of homes in your area. However, it’s important to note that Zillow does not factor in any upgrades to a property when calculating its value.
For example, if you’ve recently installed new hardwood floors or updated the kitchen, it will not be reflected in the calculations. Such ommissions can cause inaccuracies in the estimates you get.
3. Accuracy depends on housing turnover in your area
The accuracy of Zestimates depends on housing turnover in your area. If there is a high turnover rate and property sales are actively occurring, your estimates will be more accurate.
It is because the company can use local data from Multiple Listing Services (MLS) to supplement its own information. If there are few sales occurring and/or many properties are held for long periods of time, it may be difficult for Zillow to obtain accurate information on your home’s value since there aren’t enough comps.
4. Price signals from foreclosure re-sales are included
One of the biggest flaws of using Zillow home values is that it includes price signals from foreclosure re-sales in its data set. Re-sales are sales of foreclosed homes that were re-sold at auction.
The sale prices are typically lower than the original sales prices. It is because sellers must compete with other bidders and often can’t find the time to make repairs and upgrades before the sale.
Such properties are not an accurate representation of the market. They are often high-turnover properties neglected for months or years, and they often come with a host of unpleasant surprises.
Should You Use Zillow Home Values?
Zillow can be a useful tool when pricing your investment property. You can use the data to determine whether your property is priced competitively, as well as what comparable properties are worth.
However, you should use Zillow estimates with caution. The data is not always accurate and may not reflect the value of your particular property at all times. You should also be aware that a home’s value is often determined by its condition, location, and other factors not reflected in Zillow’s database.
In addition to using Zillow home values, you should consider hiring an appraiser or professional real estate agent to help you price your investment property correctly.
How to Accurately Price Your Investment Property
Here are a few tips to help you come up with an accurate price for your investment property:
1. Look at comparable homes in your area.
The first step in determining the price of your investment property is to look at comparable homes in your area. You can do it by looking at several similar homes in your area that are currently on the market and recently sold. By doing this, you’ll get an idea of how much your home should be priced.
An estimate of what you can get for your property is helpful in determining what you should ask for it. Look at homes that are similar to yours in terms of size and features, and see how their prices compare with yours.
2. Talk to an experienced agent or appraiser
It’s important to talk to an agent who has experience and training in your area. The real estate industry is full of technical jargon, and it can be hard to know what you’re getting into when you’re just starting out. Many people think that they can handle the process on their own, but this is often not the case.
If you want to get a good deal on your home, talk to an experienced agent or appraiser. They can help you figure out what’s realistic for your situation, and they’ll give you an idea of how long it will take to sell based on recent sales prices in your area.
The best way to find an experienced agent or appraiser is through word of mouth from friends or family members who have recently bought a home or sold one. They should be able to answer questions about your specific situation, such as whether it makes sense for you to buy or sell now, what types of properties are available in your price range and location, and more.
Related: The 9 Best Real Estate Agent Directories
3. Use Mashvisor’s Investment Property Calculator
Mashvisor’s Investment Property Calculator is a powerful tool for determining the value of a home. You can use it to determine what your property is worth. It uses both traditional and predictive analytics to help you find and analyze neighborhoods and properties in your area.
Once you enter some basic information according to your area and criteria, click the “Start Analyzing” button. The tool will then display relevant information about the property’s potential investment performance.
It will also show a list of other properties for sale in your area, giving you the opportunity to compare their prices, amenities, and other features to those of your own home.
Zillow home values are a valuable tool for real estate investors. It is easy to use and can help you determine what your investment property is worth. However, it doesn’t come without caveats.
The algorithm that determines these home values isn’t designed to take into account all of the nuances of each individual home or neighborhood; as a result, you may find that it overestimates or underestimates the value of certain homes in your area.
If you are interested in selling your property, you can look at alternatives to Zillow home values. Hire a professional appraiser or realtor who can give you an accurate estimate of value based on recent comparable sales in your area.
To estimate your potential ROI from your rental property – whether long-term rental or Airbnb – you should include Mashvisor’s investment calculator in your arsenal.
To start analyzing properties using Mashvisor, sign up for a 7-day free trial, followed by 15% off for life.