In June of this year, Zillow made updates to the Zestimate home values on their website. The two biggest changes included how the Zestimate is calculated and the second is how they report the level of accuracy/inaccuracy. This isn’t the first time Zillow has made updates to their Zestimate tool; updates are made every couple of years to continue to make this piece of their platform a key factor in how they set themselves apart.
The biggest change that we see out of this update is that the Zillow system can now ‘see’ the photographs of the house and distinguish between high-end and low-end finishes. By doing so, the Zestimate will be able to incorporate the value of the features such as bathroom fixtures, fireplaces, and remodeled kitchens. This update applies to houses that are currently on the market since Zillow will have the most recent photos available for the listings.
In previous years, Zillow only gave median errors for all Zestimates combined in an area. In 2016, the national median error was 6.7%; last year, it went down to only 4.6%. Currently, homes that are not listed for sale are seeing a median error of 7.7%, but for those that are currently on the market, the median error is only 1.9% when Zillow has the photos and extra information.
According to an article published in Forbes, The increase in the accuracy of Zestimates of for-sale houses is because of the improvements Zillow made to how they make Zestimates but also because they now calculate the accuracy of for-sale Zestimates separately from their less accurate, off-market Zestimates.
So, now that you know the ways that Zillow is working to improve on the accuracy of their Zestimate, what does that mean for you?
As a home buyer, with a low median difference between the final Zestimate and the actual sales price being only 1.9%, you’re going to get a good ballpark of how much houses are actually selling for in a particular neighborhood. However, if you’re just curious as a homeowner as to what your home is currently worth, you’ll want to consider the Zillow range instead of the exact Zestimate.
In the end, two problems still remain; how to handle when Zestimates are lower than the asking price, and how to handle when the Zestimates are much higher than the asking price.
The truth is, everything that is produced through Zillow is done through artificial intelligence. While Zillow is continually working to reduce the margin of error, it will never replace a properly conducted CMA report given to you by a real estate agent, and it will never accurately value the home like an appraiser.
The Zillow Zestimate should always be used as a tool, and if the Zestimate is much different than what your agent is suggesting to you, put your trust in the agent. They are the ones that are on the ground doing the work to ensure your home is properly priced.
If you have any questions about the Zestimate of your home or land that I currently have listed, please feel free to reach out and discuss. Thank you for the opportunity to be of help!