Many buyers and sellers like to know the value of a particular property before they even meet with a real estate agent to discuss buying or selling a home. Sellers want to know how much they can get for their property, while buyers want to know how much a home is actually worth before they submit an offer. It’s smart to be informed, but many buyers and sellers turn to websites like Zillow to assist them with this before talking to an agent. However, this may not be wise.
In a recent LA Times article, the CEO of Zillow admitted that Zillow Zestimates have a “median error rate” of 8% nationwide (see http://www.latimes.com/business/realestate/la-fi-harney-20150208-story.html). That error rate is pretty high, and it’s even higher in certain areas of the country (for example, in some rural parts of California, the error rate is as high as 26%). In Los Angeles, Zestimates are off by more than 5% over 60% of the time (see http://www.zillow.com/zestimate/#acc). That’s huge. That means that Zillow is wrong more often than it’s right, and it’s wrong by more than 5%. So, for a house that’s actually worth $1,000,000, the Zillow Zestimate is probably off by at least $50,000, making it difficult for sellers to know how much their home is worth and for buyers to know how much to offer. So, while the Zestimates can be a good starting point when looking at the value of a property, it’s essential that buyers and sellers consult with a real estate agent who can provide accurate information on the selling price of comparable homes in the neighborhood. Real estate agents — we’re better than algorithms!