Zillow's CEO Spencer Rascoff sold one of his personally owned Seattle homes in late February for $1.05 million, a whopping 40% less than his company's property page estimated the home's value.
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Though Zillow itself openly acknowledges that it's Zestimates are just that-estimates-many consumers are lured in by the dollar figure, especially if it plays in their favor. This can result in pricing challenges between sellers and their agent as some consumers believe that Zillow possesses a 'crystal ball' when it comes to home valuations.
Zillow says that it's national media error rate for it's Zestimates is 7.9%. This means half of Zestimates nationwide are within 7.9 percent of a home’s sales price and half are off by more than 7.9 percent.
As with Rascoff's home, the Zestimate for luxury properties tends to differ from the actual market value much more than less expensive properties.
"Zestimates can’t take into account “non-quantifiable facts,” such as layout design or lighting, and these facts can have much more of an effect on the values of luxury homes than less expensive properties,says Zillow Senior Economist Skylar Olsen. Real estate agents can see how special features impact a property’s value, but the “Zestimate algorithm can’t know” and “at this point in time, it’s not designed to know,” she said.
As such, though it's calculated scientifically using a variety of data, the Zestimate is a good starting point as well as a historical reference, but it should not be used for pricing a home.
If you are in the market to sell a home in San Francisco or Marin County, The Costa Group can help you determine the market value of your home.
