It happens sometimes, as we sit at the kitchen table, market data and comparable home sales spread out in front of us. When I’m discussing list price with my seller clients, it’s not an unusual question: “How concerned should I be about my home’s ‘Zestimate’?” My answer is always that my sellers are more concerned with that number than most buyers I come across.
So, what’s a Zestimate, anyway? It’s an ‘automated valuation system’ that listing syndication website Zillow.com created as a way for folks to get a feel for what the market value of a home could be. Other sites have developed similar systems. Zillow explains it on their site as:
A Zestimate home valuation is Zillow’s estimated market value. It is not an appraisal. Use it as a starting point to determine a home’s value.
The algorithm that they use to come up with this value is proprietary, but they say the more data they have, the closer they can come to an accurate number. They utilize nearby home sales, along with the tax data on the home being valued. Owners can add information on their homes which could affect the value generated. It’s my understanding that they recently tweaked it to weigh the tax record information more heavily.
What does this mean for you? As a seller, it’s good to know what your potential buyers may be looking at. However, it should have zero bearing on how you price your home. If it’s significantly off the market value, updating the home’s details on the site could adjust it a bit; that’s something your agent would be able to do once the home is listed anyway. As a buyer? Zestimates are a great jumping off point for getting a feel for homes in different neighborhoods. It should have zero bearing on any offer you make on a home. Your buyers agent will be able to provide you sold and recently under contract listing information that will be a much better guide for structuring an offer.