The Z estimate is usually less accurate than your real estate agent's estimate and can be discounted by thousands of dollars. According to Zillow's Zestimate page, “The nationwide median error rate for the Z estimate for in-market homes is 1.9%, while the Z estimate for out-of-market homes has a median error rate of 7.5%. A professional real estate appraisal is much more accurate than a Zillow Zestimate. You should keep in mind that Zestimate is just an estimate based on available data and will often overlook vital information about a home's condition and renovations.
A Z estimate can't work as an appraisal and you can't use it to get a loan and you shouldn't take the value too seriously. If you really want to understand the value of a home, you need to do an appraisal. Note the difference in Redfin's 1.77 percent error rate for listed homes versus its 6.66 percent rate for out-of-market homes. Given this, Zillow's claim that it will have a 4 percent composite error rate in 110 million homes, the vast majority of them out of the market, is see better.
In one notable example, Zillow co-founder Spencer Rascoff sold his house for 40% less than the value of Zestimate. Accuracy is very important in this field because many buyers and sellers use online estimates to price their homes or make purchase offers, literally giving sellers or buyers the estimates as part of their negotiation strategy. Many home sellers search Zillow or Redfin for the value of their home before refinancing or listing it. Those home sellers who “anchor themselves in high inaccurate estimates will overvalue their homes for sale and then find it emotionally difficult to lower the price.
We encourage buyers, sellers and homeowners to supplement the Zestimate with other research, such as visiting the home, obtaining a professional home appraisal, or requesting a comparative market analysis (CMA) from a real estate agent. Zillow publishes Zestimate home valuations for 104 million households nationwide and uses state-of-the-art statistical and machine learning models that can examine hundreds of data points for each individual home. In neighborhoods with a greater diversity of housing types, ages, interior improvements and land sizes, or in non-urban areas where comparable housing and data are difficult to find, you seriously doubt the claim. Home sellers can take a quick look at the inaccuracy of online home value estimators by comparing the estimates that different websites give for the same home.
However, in some home value estimation cases (especially in older neighborhoods), Zillow's estimate won't come close at all. Most of the time, Zillow and Redfin have different estimates for your home because they have slightly different approaches to calculating home value. Its proprietary algorithm takes this information and produces what Zillow considers an accurate estimate of the most likely selling price of a home. It's important to note that Zillow's data is noticeably better for in-market homes than it is for out-of-market homes.