Yesterday we had in our office an appraiser doing a CE or continuing education course regarding appraisals, how to value homes, etc..  One thing that came up in the conversation was the Zillow Zestimate.  He started off by saying the Zestimates only had two stars in our market and were "completely unreliable."  To note, most online valuations by themselves can be inaccurate without additional information to true them up.  Today we see so many brokerage websites as well that will let you, "Get My Home Value."  Yet most are a single figure or range of value that once again by themselves are not really enough to tell the whole story.

If we look at how Zillow defines their Zestimate, they provide a wealth of information located at http://www.zillow.com/zestimate/.

Now looking at what I see in the real estate industry, let's look at how banks value their own inventory or relocation companies assist an individual relocating to a new market in valuing the home they need to sell.  First off corporate sellers typically ask for a BPO or broker price opinions. They get 2 agents to do a valuation (price opinion). Traditionally speaking, these are deemed as accurate when the figures provided by both agents are within 5% of each other.  If they are not, they will ask for a third BPO from yet another agent to find which of the first two estimates were most correct to true up the process of finding real value. Never have I seen a corporate seller list a house based on one agent opinion alone!

Getting back to Zestimates for a moment, yes they can be off, but I find them to be in some neighborhoods, cities, or communities as being pretty close.  Still, when I personally value a home I also use a second AVM or automated valuation model that can be crossed with the Zestimate and normally if you can find them both within about 5% of each other you probably have a reasonable value.  Many times I do a CMA or current market analysis on my own as well to make sure I find a figure within a 5% range of what both AVM's are telling me a house should be worth. 

One valuation is not enough on any property however.  For example, looking up the the Zestimate on one of my listings is $334,000.  The secondary AVM that I reference most often, one used by banks to find values for refinancing for example, says this same house is worth $348,000 with a range of $341,000-$355,000.  In this case, the Zestimate and the value of $348,000 are about 4% apart.  I would say real value is between these figures if I am looking at online figures alone.  Now with that said, I would probably consider true value to be found more closely in that Zestimate of $334,000 to the low range of my secondary AVM of $341,000 to be most accurate.

So we have an accurate range right?  Maybe not.  Going back to my example based on corporate sellers for a moment, the broker price opinions are done after visiting the homes and doing additional valuation on a spreadsheet of the differences between homes as seen in person.  The owner of my listing for example would contend that the $8000 out building he put in the backyard is not showing on tax records and therefore his house is worth, per his last appraisal, $4000 more than what any online model might tell us.  He would probably be right.....

Never forget that much of what is online regarding Zestimates to any online model don't tell you the right answer until you confirm their accuracy. I have seen a home that on public records it showed the house was a 2 story home on a basement and it turned out to be, in real life, a 3 story home on a slab!  Outbuildings or in-ground swimming pools can and will make a difference.  Finished heated and cooled space in a basement that Zillow shows as unfinished basement space. This is to no fault of their own as the seller or a previous owner finished the basement without a permit which would have helped to make tax or public records more accurate.  These things add value you can't see and measure with any online valuation model alone.

What online models give you is a good range of value.  My encouragement is to always keep an open mind though as to what you can't see just from online records that might make a home worth more to value your home correctly if marketing it for sale or to make a reasonable offer to obtain that next dream home!