Online resources can prove to be very helpful when looking to sell your home. But be careful what you use, because not everything offered on the internet is accurate or reliable. For instance, Zillow is an online real estate database company providing data and images on millions of homes, along with pricing strategies, etc. Zillow is also well-known for its online estimates as people compare rates and decide how to price their home. The problem here is that these online estimates follow a rough template and can inflate the price of what the home is actually worth, creating potential conflict if the price is higher than a Realtor wants to ask for it.

Zillow staff are aware of the price difference, too, and have created a section on their website to explain the variables taken into account within their algorithm and how the “Zestimates” (Zillow estimates) are created. The website even states that Zillow has an 8% median error rate across the country—due to varying aspects, such as changes in local markets—meaning that half of the Zestimates made fall within 8% of the actual selling price, with the other half outside of that range. The company also concedes that the public information records it uses in its formula can sometimes be outdated or incorrect. Most importantly, Zillow does not have access to sold prices in the market.  All the information that Zillow uses is based on what list prices are and public tax records.

Many people have been relying on these predictions, assuming that the Zillow price is the fair market value and pricing their homes at an unrealistic price range for their particular market. Zillow CEO Spencer Racoff states that the website was never intended to be used as an authoritative source, but rather a starting point for sellers. It should not take the place of an appraisal, or experts in the field, such as the seller’s local real estate agent. While sellers can get an idea of a price estimate off of online resources such as Zillow, they should still utilize Realtors and other professionals to interpret those estimates and make them relevant to their actual market.

Article Citation: Snader, Nikelle. (March 26, 2015). “How Zillow is overestimating the value of your home.” CheatSheet Business. Retrieved April 7, 2015 from: http://www.cheatsheet.com/business/how-zillow-is-overestimating-the-value-of-your-home.html/.

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