Every day I speak to real estate agents and brokers who use Zillow. Every day these agents and brokers tell me they use the Zestimate® home value, and inquiries about it, to create opportunities for further interaction with contacts.
There is some mystery behind the Zestimate—what is it, how is it calculated, and how accurate is it? We’ll demystify some of that here. Why does it matter? Because there is a good chance your client will have been on Zillow, and it’s important to understand how the Zestimate works in order to best assist them.
Equally as important, I want to highlight how to make Zestimates work for you—because they really can, when used with the right approach.
What is a Zestimate and how is it calculated?
A Zestimate is an estimate of the market value of a home computed using Zillow’s proprietary formula. It is a computer-generated estimate, not an appraisal. We can only provide an estimate of the home value based on available data because we cannot inspect every home alongside an appraiser or homeowner.
Currently, Zestimates have a national median error of 8.7 percent, meaning we’re doing pretty well overall. Nearly one-third of Zestimates fall within 5 percent of a home’s sale price, and nearly 60 percent fall within 10 percent (data updated on Dec. 4, 2013 and shown on Zillow).
To calculate Zestimates, Zillow uses proprietary valuation models that identify relationships between home-related data and actual sale prices in set geographic areas. Our models incorporate a robust spread of data, including physical attributes of homes, tax assessments, actual sale prices over time, relevant market activity like foreclosures and sales of nearby homes, and user-submitted data by owners, appraisers or listing agents.
This data feeds into our algorithm that computes individual Zestimates for 110 million homes in the United States, which is refreshed three times a week to ensure the Zestimate incorporates our latest and most accurate information.
How can you leverage Zestimates?
Here are three ways agents use them:
1. Use Zestimates to establish yourself as the local expert.
Data has its limits. For that final and crucial step in assessing a home’s exact value, homeowners, appraisers and agents need to weigh in. You have a huge advantage to position yourself as the local expert, since you understand a home’s real worth when factoring in the qualitative neighborhood attributes and desirability not captured in our algorithm.
2. Claim the home on Zillow as a listing agent and update its information.
If the Zestimate for your listing is not up to market value, the data may be incomplete. You can fix this by logging into your Zillow profile, claiming the listing and adding comments about features that may increase the home’s value, like a remodeled kitchen.
3. Use Zestimates to engage potential clients.
Work with potential sellers who are dissatisfied with their Zestimate by offering to help them increase its accuracy by updating the home’s information on Zillow. Work with potential buyers by using the Zestimate value and/or the property features to learn more about what they’re looking for.
Interested in learning more about Zestimates? Visit www.zillow.com/research for information on Zestimates and other useful resources, such as local market overview reports and the Zillow Home Value Index.
Jay Thompson is Zillow’s director of Industry Outreach.
For more information, visit www.zillow.com.