According to recent studies, most people who are buying a home begin their home searches online. And in that search, many turn to Zillow, a well-known real estate website.
In addition to posting listings of properties for sale, Zillow offers “Zestimates”— estimates of the value of any address in the company’s database, whether it’s on the market or not. Homebuyers and sellers often use these estimates to evaluate the worth of local properties they are thinking of purchasing or putting on the market. With Zillow’s recent acquisition of competitor site Trulia, its estimates have taken on even greater importance.
But site visitors should be forewarned: Zillow’s own CEO admitted on CBS This Morning that these are only ballpark estimates. Asked by anchor Norah O’Donnell if Zestimates are accurate, Spencer Rascoff noted that they have a “median error rate” of 8%.
And in different locations, the error rate can go far higher.
“For example,” reports the Wall Street Journal, “in New York County — Manhattan — the median valuation error rate is 19.9%. In Brooklyn, it’s 12.9%. In Somerset County, Md., the rate is an astounding 42%.”
This results in seriously misleading information. For example, writes WSJ, in San Francisco, the median error rate is 11.6%: Using that figure, that city’s median home value of $1,000,800 (the Zillow estimate as of December), could be off by as much as of $116,093. Read more about their margin of error for different US metro areas here on their website.
While sites like Zillow offer a good place to start researching home markets, buyers and sellers should realize that many factors go into assessing a home’s worth. Computer models can’t easily compute intangibles: Renovations that raise the desirability of a home, neighborhood variables and other particulars can greatly affect the value of a home.
As Zillow’s Rascoff noted, Zestimates are “a good starting point.” But they should be taken with a grain of salt. They “are hardly gospel,” notes the WSJ, “often far from it.”
Now due to COVID-19, many borrowers are seeing a marked increase in appraisal waivers. Bankrate has a guide that provides information on qualifying for an appraisal waiver and in-person home tours during the pandemic as well as a useful calculator that gives readers an estimate of how much home they can afford. CLICK HERE to view the guide and access the calculator.