“The Zestimate on my house was 10 percent higher than the appraisal for a refinance” in February.
That was the experience John in Newton had with Zillow’s home valuation algorithm, according to a survey he answered on Boston.com.
For many area real estate brokers and agents, it is a matter of having too many too many cooks in the kitchen.
Bob O’Malley, the principal broker and owner of Provincetown-based Beachfront Realty, had a recent listing presentation in which he gave an estimated value of $1 million to $1.1 million for a 1,500-square-foot hilltop condo with great views, a deck, and a garage. Zillow’s Zestimate was $1.36 million for the condo, but O’Malley had made adjustments for steep stairways and the poor condition of the property.
“In this case it was easy to explain that Zillow had not accounted for the condition and the stairs,” O’Malley said. “In Provincetown, I think they also miss the nuances of different neighborhoods and the rent ability, which are both big influences on value.”
Zillow uses property records and user-submitted data to determine the value of a home’s Zestimate, but the company also cautions that it shouldn’t be seen as an official appraisal.
Brokers in Greater Boston say buyers and sellers frequently mention the Zestimate tool — which means having to spend time explaining why the feature isn’t always accurate.
“Even though they understand that they need to take it with a grain of salt, it puts the number in their head, and it’s very hard to work from that,” said Morgan Franklin, a sales associate with Coldwell Banker.
The Zestimate tool relies on data rather than in-person tours, which means it can miss significant changes at a home such as an addition or major renovation.
“When I go to a seller and I say, ‘Your house is worth $8 million,’ and then buyers come and they’re like: ‘Oh, but the Zestimate only says $5.2 million. Why are you saying $8 million?’” said Maggie Gold Seelig, founder of the luxury boutique firm MGS Group Real Estate. “Well, because Zillow doesn’t know that the owner here renovated it seven years ago and that it’s a completely different animal.”
One of the more extreme examples of this was the recent sale of 32 Highland St. in Cambridge, which sold for just over $16 million. The Zestimate for the property in July, however, was only $7.1 million. The tool didn’t consider things the prior owner did to the home, including a gut renovation, exterior restoration, and the addition of an outdoor kitchen.
The Zestimate moved more in line with sale prices in recent months.
“Does that not tell you exactly that Zillow has no idea what’s going on?” Seelig said. The Zestimate was updated after the sale.
A recent Boston.com survey indicates that the vast majority of respondents don’t appear to be relying solely on Zestimates when it comes to determining a home’s price. Forty-two respondents said they were skeptical of the tool, while only 17 said it was a great resource. Thirty-three respondents said they have used it.
One of the skeptics, as reader and retiree from Raynham, shared a sentiment held by each of the brokers interviewed for this story: The Zestimate tool works best in Sun Belt markets or other parts of the country with master-planned housing communities, where the homes are similar.
John in Rehoboth said, “Zestimates are inaccurate for the fact that years of significant home improvements are not included.”
One of the respondents who said the Zestimate is a great tool noted that when she purchased her Shrewsbury home in 2012, she relied upon it to reach the buying price. “It has generally tracked our home prices with accuracy, with market trends,” S.S. wrote.
Zillow said the Zestimate is a largely accurate tool, as the company reports a median error rate of 4.3% for on-market homes in Boston, which is a little more than its national rate of 3.2%.
A company spokesperson noted that the Zestimate is more accurate for homes actually on the market compared with those that aren’t listed (Keep in mind this would mean the company starts factoring in elements like a list price, as Seelig mentioned).
“We don’t know unless someone tells us what additions have been made or what renovations have been made or if there’s an extra bathroom that’s been built, things like that,” said Matt Kreamer, a director of data public relations at Zillow. “Generally speaking, when that happens is when a house goes on the market.”
Kreamer said there are constant updates to the Zestimate model, including artificial intelligence capabilities that view photographs of a home and factor in elements like curb appeal.
But Zestimate isn’t the end-all, be-all valuation tool, even in the mind of Zillow.
“We’re very proud of it, and we’re confident in it,” Kreamer said. “But we don’t ever try to say you don’t need a real estate professional or you don’t need an agent or you don’t need an appraiser because here’s the Zestimate. That is definitely not the purpose of the investment.”