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Reviewing the Accuracy of a Zestimate and other Automated Value Models
Posted: August 08, 2019 by John Moore

Many professionals in our industry go to great lengths to malign Zillow’s automated value model (AVM), commonly referred to as the Zestimate. At the outset of Zillow, that criticism was justified in that the values produced by the Zestimate could be vastly different from real market values. Today, as with most AVM’s, Zillow’s algorithms have evolved and now produce results within a tolerable margin of error in a majority of cases.

 

However, we (and Zillow for that matter), recognize the inherent weaknesses in the Zestimate and see it for what it is…a good starting point to value a property, but nowhere near the accuracy of a professional appraisal or competitive market analysis (CMA) produced by an experienced real estate agent.

 

Texas is a non-disclosure state. What exactly does that mean? It means that the state does not mandate that sales prices be disclosed to governmental entities at the time of a real estate conveyance. Therefore AVM’s don’t have access to closed sales prices in Texas unless those prices are shared voluntarily by a Multiple Listing Service (MLS) or property owner. The Amarillo Association of Realtors’ MLS does not share its sold data with non-affiliated AVM’s.

 

In the Amarillo MSA, Zillow uses a combination of tax valuations from county appraisal districts, prices of listed properties uploaded to Zillow.com, and actual sales data provided by property owners. The absence of actual sales data from all sales, by definition, limits the accuracy of any AVM algorithm. Additionally, unless provided by a property owner, Zillow does not have access to information that may affect the current value of a property such as property condition or layout, recently added square footage to a property, or updates to kitchens or bathrooms, etc.

 

Therefore we, at Coldwell Banker First Equity, Realtors, agree with Zillow that its Zestimate is a good starting point from a valuation perspective. On the other hand, our real estate professionals at Coldwell Banker utilize actual sales data from the MLS including recent as well as historical property information, taking into account recent additions and updates. Additionally, the Zestimate doesn’t take into account current market conditions in a neighborhood (shortages or surpluses of inventory, absorption rates, etc.) as part of its valuation. Only an experienced, full-time professional who is knowledgeable on local neighborhood market conditions can provide a property owner with the information necessary to make an informed decision about the value of their property.

 

Yes, the Zestimate is a good starting point, but it won’t get you to the finish line.

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