Michael,

Simply stated, all you need is an understanding of the general location to determine many Zestimates are based on inappropriate comps. generally associated with location of the homes.

When dealing with this site it is important to take care using the information that is provided. It's a great site....when used in combination with your personal information about the location.

Be cautious.....

At the bottom of Zillow's home page there is a link that takes you to this page http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm. You will see that for some areas their accuracy is pretty good, whereas in Tampa they only have two stars which is fair. And you will see they are only 61% accurate to 20% above or below they actual sales price. The problem as others have stated is that they are going by tax records which do not show the full picture. I recommend that people look over the comps that they give very carefully. In subdivisions where the homes are very similar the values are fairly accurate as long as the subdivisions in their radius are also accurate. Where I have seen them even more inaccurate is where none of the homes are similar or vary greatly.

For example, I deal in a lot of waterfront homes where there may be a 4,000 square foot waterfront home near to homes that are as much as 2,000 or more square foot smaller, and on some I have seen an 1,800 square foot home used as a comp for a home more than twice the size.Waterfront homes with docks are sometimes considered equal to a non-waterfront home.

My biggest problem with any of the online valuation sites is that buyers are often using them to come up with their offer price. And if they have a Realtor, they are not even listening to them. I had an offer put on a $1 million plus home directly on Tampa Bay that got an offer of $400,000. When I said to the Realtor are you kidding me, the Realtor said the buyer got the valuation off an Internet website. I checked and it did say that, however, a lot in the same neighborhood had just sold for twice that.

I believe these types of websites have are good to get a look at the neighborhood and homes, and there is a lot of useful information, but they rarely should be used for more than a general ideal of value. I have sold homes where if you listened to these websites you would have lost the home to someone else if you offered the value given, and others that you would have overpaid significantly for. Of course the home would never appraise, but the seller would love to take the money.

These websites also do not know if the home that sold is a regular sale or foreclosure, whether they are in perfect shape or need major repairs, even mold remediation or a sinkhole. If a Realtor does their homework while doing a CMA they can find all these things, but the valuation websites will never be able to find and report this information.

It is definitely caveat emptor when it comes to valuation websites, but they are a great starting point.

Sincerely,

Jeff Launiere, P.A.
Keller Williams Realty
Real Estate Consultant
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Michael,

As zillow states and Matt implies in his post, a zestimate is just a starting point, and nothing more.

http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm

Hello:

Zillow relies primarily on public record information, like house size, assessed value, age, etc. It then uses a lot of proprietary formulas to come up with the zestimates. But these are things it doesn't use:
A) Road noise: Is your home noisy? Zillow doesn't know that. Buyers do.
B) Is your lot steep? Zillow has no way to evaluate the steepness of a lot, other than the town assessment info, and that's not very reliable.
C) Floorplan: Buyers like certain floor plans, and dislike others. This can be a 20% swing in home value alone, and there's no real mathematical way to capture this. A recent sale would, but even that isn't reliable.

There's other "intangibles" that make things difficult. You'll find Zillow does very well in dense areas where the housing is similar, but in rural areas, where the housing is less uniform, it can miss market prices by 25% or more.

Matt

I personally think it's pretty off. It said my aunts house (inherited property) was worth 110k but we put it on the market for 80k after getting three different CMAs from three diff companies.

It also says my house is about 11k higher than I paid for it in November. The price I paid was a pretty good comp to the others in the area.