Top 5 Reasons Why You Cannot Trust the Accuracy of a Zillow Zestimate

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Lucas Smith
Thursday, July 21st, 2022
By Lucas Smith

When you are thinking about selling your home, looking at the information on Zillow, like their Zestimate, or their estimate of your home's value, is a popular thing to do, but how accurate is it? Today we'll talk about the top 5 reasons why you cannot trust the accuracy of a Zestimate.

1. Zillow is not looking at your home’s condition and features

Here's an example: The Zillow “Zestimate” for a home on 1866 Orizaba Ave was $570,000. Other agents told the seller their home was worth $570,000. But I could see the upgrades and location in the community had value, and I knew it would sell for more. We listed the home at $625,000. Right after we did that the Zillow Zestimate went up to $610,000. I ended up selling this home the first weekend for $640,000.

If the seller followed the other agents' advice and the Zillow Zestimate, it could have cost them $70,000!

2. Zillow has little knowledge of your location or a lot of qualities

Location is 70% of the buyer's purchase decision. Mountain views, cul-de-sacs, golf courses, and walking distance of schools can add value.

3. Zillow's data is often inaccurate

Zillow gets 50% of its revenue from real estate agents buying leads from them. They don't even tell buyers a home is under contract. They just want buyers to call so they can sell leads to real estate agents. When they give comparable sales, Zillow does not always do an apples-to-apples comparison to indicate a home's value.

4. Zillow cannot keep up with the market shifts

As the market changes, Zillow’s Zestimate cannot keep up with changes like a rise in interest rates or seasonal changes. Their values could be over or under-stated by thousands.

5. Zillow is buying and selling for a profit

Zillow has positioned itself as the "Gold Standard" for real estate values online, similar to a Kelley Blue Book for Real Estate. And yet, they are offering to buy homes, and then they add a few minor upgrades and sell the homes for a profit - this is called 'flipping". So they tell the world your house is worth X or Z. Zillow then makes offers to desperate sellers who must sell now.

Oh, and did I mention that Zillow does not charge a commission? But they do make offers on homes well below market value, and they charge a 7% or more "service fee." It's not a fair fight for a homeowner who needs to sell their home. And, effectively, those home sellers are selling their homes to Wall Street investors.

Selling your home to Zillow might work for home sellers who need a quick cash sale. But even our local investors will often pay more than Zillow for homes. The real numbers are that Zillow is only making offers on 2.4% of the homeowners that present their homes to Zillow for sale. Once Zillow obtains the contact information of motivated home sellers, they sell the leads to real estate agents for 35% of the commission. And Zillow has in its corporate mission statement to put real estate agents out of business!

In Zillow's world, consumers do not need real estate agents. They believe all can be done online with their very powerful website. Time and time again we find cases where home sellers gave up tens of thousands of dollars of equity just for the easiness of the quick sale button.

A majority of real estate agents have the objective of getting home sellers the most amount of money when their home sells, not the least. And, I believe, at the end of the day, because the real estate industry has home sellers' best interests at heart, it will remain intact for years to come.