I recently read a really cool blog post from an appraiser in Philadelphia called “Zillow vs. The Coyle Group.” In the article, Michael Coyle looks at more than 20 of his most recent reviews and compares them to what Zillow says they are worth through his Zestimate. With sites like these that seem to be gaining popularity with consumers in recent years, I thought I’d do my own analysis.
The results may surprise you, they did it to me. Of the 20 properties analyzed, many of which were recent sales, Zillow differed from appraised value by more than 5% on 16 of them and the average difference was 20.16%. And the four that were within the 5% were recent sales in the last 6 months. That means, on average, Zillow’s estimated home value is $ 300,000 and is off by an average of $ 60,000. Another interesting statistic is that there were 10 high / overvalued properties and 10 low / undervalued properties. To further corroborate my results, I compared them to The Coyle Group and noticed that they found an average difference of 18.95%.
Digging into the individual properties, I was unable to determine which exact factor led to some of the biggest discrepancies. For example, the Glencoe Colonial property is currently 1,100 square feet. foot two levels to be torn down and a new 3200 sq. ft. foot built house. It is trading for $ 1,199,000 (the exact value of Zestimate) and is under contract for around $ 1,050,000. This would lead me to believe that Zillow is giving the most weight to the MLS listing price and ignoring the real features of the property. However, the Zestimate was 41% off the Portage Park bungalow, which was listed for $ 460,000 and sold for the same price. In this case, why would the Zestimate be $ 273,265? You must have ignored the listing and the asking price when it seemed to depend solely on the listing price on Glencoe’s proposed construction. Yes, I am also scratching my head.
While I am not here to break down the Zillow method or algorithm used to determine values, I do want to warn the prospective home buyer / seller not to trust Zillow values and advise them to hire a certified appraiser to ensure that all factors have been included in the opinion of the market value. This will prevent you from listing your home too high, which could put your home on the market much longer than necessary. It will also prevent you from listing your home too low and potentially leaving money on the table.
You can read Zillow vs. The Coyle Group here.