One of the first steps to buying or selling a new home is looking at Zillow, Redfin, or another site that provides computer generated home value estimates. But how accurate are these estimates? If you’re the seller, what do you do if you believe the number attached to your home is incorrect?
Below, I go into the answers to these questions and more regarding home value estimates you can find online, including what factors go into these calculations, and which don’t.
How accurate are these computer generated estimates?
Zillow and Redfin are generally considered the sites to go to for computer generated home estimates, along with Realtor.com. There are others, such as Trulia (acquired by Zillow in 2015). The computer generated home estimates tend to be pretty precise, and are getting better as technology improves. But they’ll likely never be 100% accurate in real time.
For one thing, the housing market is constantly changing. For another, there will always be some margin of error with user-submitted data, which some of these sites draw from, and data that is publicly available. If a house has not been on the market in a long time, for example, and the owner has added a deck or a pool or has otherwise made significant upgrades, these may not have been reported.
When it comes down to the actual numbers, according to Investopedia, as of April 2022 Zillow’s median error rate is 1.9% for on market homes, and 2.28% for Redfin. These numbers are pulled from the companies themselves.
As of 2020, Realtor.com offers three third party home value estimators: Collateral Analytics, Quantarium, and CoreLogic. Unlike Zillow and Redfin, they do not share their actual median error rate. However, they’re affiliated with the National Association of Realtors, and the site is generally considered to be one of the most accurate, if not the most accurate, computer generated home value estimator. They’ve also been around longer than their competitors.
How is the data collected for the estimates, and what factors are considered?
Zillow estimates (Zestimates) are determined by a combination of user-submitted and public data. They have a larger database of listings than Redfin. Redfin, unlike Zillow or Realtor.com, is a brokerage, not a third party aggregator. Redfin draws its data from MLS listings, as does Realtor.com.
Tons of factors go into calculating these estimates, including but not limited to: square footage, number of bedrooms and bathrooms, lot size, the neighborhood and overall location, special features like a fireplace or pool, the length of time it has been on the market, tax assessments and history, previous sales prices, current prices of comparable homes, market trends and what time of year it is, current insurance and lending rates, and the age and condition of the home.
Although a lot of elements go into the “final” number, there are many things that are inevitably not taken into account: how the lighting in the living room is, what the curb appeal looks like, how the traffic sounds from the nearby highway, and the intricacies of the layout of the home. Where exactly are those three bedrooms and two and a half baths, and how will their proximity to one another affect those living in the home? And again, there may have been upgrades that haven’t been documented.
What should you do if you think your home is listed incorrectly?
The first thing to do is to verify with the appropriate site that you are in fact the owner. From there, you should be able to either directly make updates, or work with customer service to do so. Gather all the necessary documentation that can help your case, such as records of mortgage statements and tax payment history.
Note, you generally cannot directly edit a home value listing if your home is currently on the market. You will need to contact the customer support at Zillow, Redfin, or the site of your choosing.
Should you use computer generated home value estimates?
Sure! Just do so knowing that they are another tool in the toolbox, a jumping off point to start thinking about your buying and selling needs. Now that you’re armed with the knowledge of exactly how accurate they are, what kind of data goes into that number, and what to do if you think your home estimate is incorrect, you’re better equipped to use these listings appropriately.
The most important thing to remember other than to take these home value estimates with a grain of salt, is that they never take the place of a professional real estate agent, or real estate appraiser.
If you’d like to talk about what houses are costing in the Lake George, NY region today, contact me for the latest details and top notch real estate services.