Can you really trust a Zillow Zestimate?
This is a hot topic I get asked about quite a bit. Sometimes a Zestimate is high, sometimes it’s low, and sometimes it’s accurate. Let me share a couple examples of what I mean.
The first involves the CEO of Zillow, Spencer Rascoff. In 2016, he sold his property for more than 40% less than what the Zestimate priced it at. Even the CEO of Zillow had an inaccurate estimate on his primary residence.
The second involves an executive I once sold a property for. His home’s Zestimate was $2.2 million, but when we ran the numbers, the demand was closer to $1.2 million. After being on the market a couple weeks with no offers, he called me and told me to tell Zillow that we would give the home to them for 50% of the value. It ended up selling for around $1.2 million—nearly $1 million less than its Zestimate.
In Southern California, we have a diversity of housing, so it’s difficult for an algorithm to be accurate. Sometimes, it’s even difficult for an appraiser or agent to be accurate. Last week, for example, I closed on a house that was a trust sale. The trust hired an appraiser to come in and give the house a “date of death” value. This value came back at $1.18 million. When I looked at the numbers and examined the property, though, I knew it had enough going for it that it would sell for more than the appraised value because demand would drive the price up. Sure enough, demand raised its final sale price to $1.3 million, which was $220,000 over the appraised value.
“Zillow gives buyers an idea of a home’s value, but it doesn’t control its price.”
The lesson here is that at the end of the day, homes are worth as much as a buyer is willing to pay. Zillow plants an idea of value in the minds of buyers, but it doesn’t control a home’s price. You need to keep this in mind when formulating your home pricing strategy. It’s important that you have an agent come out and look at your property from the eyes of a buyer and help you figure out how to use price as a strategy—not a destination.
If you have any questions about Zillow or you’re interested in buying or selling a home, don’t hesitate to reach out to me. I’d be happy to help.