The national average error rate for the Z estimate for in-market housing is 1.9%, while the Z estimate for off-market housing has an average error rate of 6.9%. This means that the Z estimates for half of all homes on the market are within 2% of the sales price and the other half are not. The Z estimate is usually less accurate than your realtor's estimate and can be discounted by thousands of dollars. According to Zillow's Zestimate page, “The national average error rate for the Zestimate for in-market housing is 1.9%, while the Z estimate for off-market homes has an average error rate of 7.5%.
In general, the more data Zillow has about a home and a market, the more accurate your estimate will be. This means that the Zestimate is probably closer to the real value in a neighborhood where 25 similar houses were sold last year than in a city where every street is different. Redfin and Zillow can also choose different sales or “compensations” for comparable homes to determine the estimated value of your home. When you finish reading, you'll have an in-depth understanding of why the value of homes on Zillow shouldn't be trusted.
Whether you're buying or selling a home, you'll need accurate information to make an informed decision. Some homes, for example, may have an unknown number of rooms, affecting Zillow's ability to price accurately. This is probably because Zillow can use MLS data for homes on the market, which should be more accurate than data from tax records. What I mean is that they seem to generate the historical values of houses, cities, zip code & using the de jour algorithm, which has the effect of changing the entire historical record from what Zillow actually stated in the past.
One of the questions real estate agents often receive from consumers is: “How accurate are Zillow's home value estimates? Redfin's value estimates are much more accurate in states with the highest home sales, such as California (average error rate of 6.56%) than in Maine (14.81%). Many homeowners worry that when Zillow's Zestimate is a tool so widely used by homebuyers, a lower Zestimate could adversely affect their ability to sell their home. Americans love the Zestimate, but Zillow's latest business problems suggest that you should think twice before using the popular home value algorithm to make important real estate decisions. Zillow's home value index may have improved since its inception, but it's still far from being a good thing to rely on.
It's also important to note that banks or lenders don't use automatic valuations, such as Zillow's Zestimate, to estimate the value of a property for a mortgage. For example, if a home was sold in the past few months, the property data listed in the MLS is likely to remain correct. Redfin and Zillow calculate your home estimate using publicly available data about your property and nearby properties. This estimated value is based on the attributes of properties that have recently been sold in your area.
To ensure you get an accurate estimate, include details such as the sales price of comparable data, tax assessments, and previous sales records. Zillow and others might care less if you buy a home because of the value estimates on their website or other information.