Whether you’re planning to sell your home or just keep track of your investment, you’ve probably heard about the Zillow’s home value tracker tool. Zillow is one of the most popular listing sites for posting about your home sale, so it’s no wonder that it’s also a frequent tool used by home sellers hoping to learn more about their properties. In fact, there are over 110 million U.S. homes listed on the Zillow database at any given time.


Zillow’s home value tool is called a Zestimate Search, and it supposedly gathers relevant information about past home values as well as local market trends to share an estimated home value price. However, there’s a lot of skepticism surrounding whether or not this tool is accurate. In this guide, we’ll break down the science behind Zillow’s Zestimate to determine if it’s an accurate way to determine the real value of your home.


Is Zillow a good source of determining home value? | Zestimate tool


How Does Zillow’s Zestimate Work?

First, let’s take a closer look at how Zillow estimates home value. While Zillow itself describes the tool as “a starting point in determining a home’s value and not an official appraisal,” it markets itself as a top-choice for learning more about your home.


The Zestimate home valuation tool uses a proprietary formula calculated from both public and user-submitted data. It also takes into account location, home features, and the current state of the local market. Zillow claims to have a median error rate of 5%. What this means is that half of the homes are within 5% of the selling price and half are off by more than 5%.


What determines the accuracy, evidently, is the amount of information available in a specific area. For instance, some counties have a lot of detailed information available from either public or user-submitted data, and that leads to more accurate predictions. Some cities like Sacramento and Los Angeles have a high accuracy rating on Zillow while others like St. Louis and San Antonio have lower accuracy ratings.


The Challenges with Zillow’s Zestimate

While Zillow’s tool is a great starting point, it does have many challenges. This is the first time in real estate history that buyers and sellers have had more control in their own hands. They no longer need to rely on real estate agents to find information about local markets and homes. Instead, they can use tools like Zillow as well as other local data.


However, that doesn’t mean buyers and sellers can use Zillow to determine the real value of their home. While Zillow does a good job of giving local estimates, it’s still just an algorithm. It doesn’t have the power to take into consideration smaller details and variations that might significantly affect the price.


The market changes quickly. In fact, it changes every minute in some markets. This means there’s no way to estimate the current value of a home based on a single algorithm. A realtor will determine real estate market value in a different way than Zillow. They have a better understanding of these smaller variables, local conditions, and nearby sales.


What the Experts Say About Zestimate

Ultimately, there’s a reason many of the top realtors and home appraisers mistrust Zillow. As we said above, it simply can’t estimate on a specific enough scale to be accurate in current conditions. Professional appraisers will always be a much more accurate way to determine the real value of your home.


John Wake, a real estate agent who’s been practicing since the early 2000s writes in Forbes, “If you want to have the best possible estimate of your home’s value before you put it up for sale, hire a good appraiser or a real estate agent you trust.” Otherwise, home sellers might trust the wrong estimate and price their home incorrectly for the market, leading to problems down the road.


Real estate agents encourage buyers to use Zillow’s tool as a starting point, but not to put too much trust in it. Real estate agents understand just how difficult it can be to pin down the real value of a home, and that’s why pricing is one of the most complicated parts of the home selling process. While Zillow might offer a unique, interesting tool for assessing local values, these estimates need to be taken with a grain of salt.


The Future of Zillow’s Zestimate Tool

Zillow’s Zestimate tool isn’t a good substitute for a home appraisal or advice of a trusted realtor, but it’s still an exciting technological advancement that we should all keep our eyes on in the coming years. While it still has many challenges to overcome, this technology is on the horizon.


As of right now, however, don’t put too much trust in your Zestimate when it comes to determining the real value of your home. This is something that’s best left to the pros, not an algorithm.