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If you’re in the market for a new home or are thinking about putting your house on the market, chances are you’ve come across the real estate website Zillow.com at least once. The industry behemoth leader boasts over a million listings under its domain, and also gives users “Zestimates,” or rough estimates about a property’s value, for each home. What the website doesn’t tell you, however, is that these estimates can often be wrong, and a false estimate can spell trouble for both home buyers and sellers alike.

The Flaws in Zillow’s “Zestimate” Generating Algorithm

Though Zillow keeps the means by which they determine their estimates a closely-guarded secret, the website does purport that values are calculated three times a week from “millions of public and user-submitted data points.” The property’s square footage, number of bathrooms, specific geography, tax information, and local housing market are all probably figured into their equation, but as anyone who’s ever bought or sold a home can attest, these statistics paint a very superficial picture of the home’s actual value.

Some of the ways Zillow’s Zestimates fall short include:

  • Failure to determine the actual condition of a house. Houses that have been recently renovated may be worth far more than Zillow claims, while homes in disrepair may have artificially inflated values, especially if they are located in a desirable city or neighborhood.
  • Corresponding price to number of bathrooms, bedrooms, and square footage, but not taking the size or placement of each bathroom or bedroom into account.
  • Ignoring physical characteristics that might up the value of the house, such as architectural style, year constructed, and home layout.

Zillow’s Unacceptable Margin of Error

Zillow says Zestimates have a median error rate of 8%, and error rates can vary widely depending on the city and state where the estimates are being generated. If Zillow fails to account for any number of value-increasing factors and underestimates the price of your home, it may be difficult to convince home buyers of your home’s true value. For home buyers, seeing a house listed for one price on Zillow then contacting the broker to learn that the home is actually much more expensive can be heartbreaking for shoppers.

Home Buyers and Sellers Are Better Off Trusting an Expert

Zillow can be a good place to start, but serious home buyers and sellers should turn to a seasoned real estate professional to ascertain the true value of their home or get an accurate estimate for a home they are considering buying. Don’t rely on an algorithm to help you navigate the real estate market; contact Vahe Zargarian today.

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