Zillow’s much talked about estimate of home value, their “Zestimate” is based on an Automated Valuation Model (AVM). It’s a very controversial metric, misunderstood, overly and often inappropriately relied upon.
Here’s a great example. It’s a property I sold in May, 2016 for $605,000. Look just below the List Price of $499,000 and you’ll see the property’s Zestimate of $492,173. Zillow was off by $113,000, or 23%!
Nationally, the Zestimate has a median error rate of 6.9%, which means half of the Zestimates in an area are closer than the error percentage and half are farther off. For example, as shown in the table above, in Alameda County Zestimates for half of the homes are within 10.4% of the selling price, and half are off by more than 10.4%.
To put it another way, the Zestimate is wrong by at least 10% half the time. Or you cauld also say there is a 50/50 chance that the Zestimate is within 10.4% of the truth. On a $500,000 Zestimate, then, the house actually sold for $450,000-$550,000 only half the time. The rest of the time the house actually sold for less than $450,000 or more than $550,000.
Would you hang your hat on such sloppy statistics? Would you determine your best offer price based on these “comparable sales”? I wouldn’t.
If you want accurate COMPS, ask your Realtor® for a CMA which will be based on actual, accurate MLS® sales data.