During this episode of TMC John discusses what is a "Zestimate?''
JOHN: Hey guys. John Jones here with another edition of Tuesday Morning Coffee. Today, guys, we’re going to talk about a term that’s become more and more popular. It’s called Zestimate. What is Zestimate? Zestimate is Zillow.com’s version of a current market value tool of every home in the United States or every property in the United States. If you go on Zillow.com right now and you put in your address, they’re going to have a value that they have applied to your home to tell you what it’s worth based on their Zestimate. So how did they determine the Zestimate? How does this number arrive to them? Well, they use a logarithm based on physical characteristics of the home that they’re able to obtain from public records, from the tax records in most counties. Here it would be our tax record system.
They pull the information from that, compile it into a logarithm, and then they use the recent sales in the area and look at the relationship of their physical characteristics such as square footage, number of bedrooms, lot size, things of that nature. And then it computes some type of value. People ask me all the time, “How accurate is Zestimate?” Well, Zestimate claims they have a 7% margin of error, and I would say that’s probably pretty close based on what I’ve seen in this area. But 7% could be a pretty big number. If it’s a $300,000 house, that could $21,000 either way. The biggest pitfall I see with the Zestimate and I wouldn’t put a ton of stick in it is their success is going to be clearly determined by the information that they have from public records.
So in municipalities that have really good, accurate square footages and things of that nature, their values are going to be a little better. Municipalities that don’t have really good information or very vague information, it’s going to be tougher for a computer to figure up the prices or the values. I also think in older neighborhoods where homes can swing tremendously just based on who’s updated their home, who hasn’t. For instance, like Regency Park, Riverview in our area. Homes can sway tens of thousands of dollars just based on who’s remodeled and who hasn’t. That is also going to make Zestimate a little more inaccurate in those type of areas.
Conditions. Zestimate has no way to figure out if the homes are in good shape or if they’re not. So that’s another thing that can sway value, but it is a pretty decent little tool just to kind of get an idea of home value in a certain area. My favorite Zestimate story is I had a guy call me a few months ago. He was torn up. He had built a house about four years ago in a new construction area. He had built about the same size house as everybody else in there. He had spent $330,000, about the same price that everybody else had spent in this particular subdivision, but his Zestimate showed his home was only worth $280,000. And he was just tore up about it.
And I told the fellow, I said, “Chris, I bet I can figure out your problem.” I said, “Give me a few seconds.” I went to the tax records. They had his square footage in there at 2,700 square feet let’s say. I said, “Chris, how many square feet do you have in your home?” He said, “Well, I have 3,300 square feet.” And I said, “Well, there’s your problem. The tax record where they’re pulling this information from has a lower square footage than your home actually has. Therefore, it’s going to value your home less on the Zestimate.” And I said, “But, however, your taxes you’re paying on your property are less than anybody else in the neighborhood as well.”
I said, “But if you want to get your Zestimate up, go down to the tax office, complain that you want your square footage to come up, so you may have to pay more property tax. And your Zestimate will come up as well as soon as Zestimate pulls that information.” He decided that he was okay with his Zestimate because he didn’t want his taxes to go up. So that was kind of a funny story, but he truly was very upset about his Zestimate. So guys, the key is if you want to know the value of your home or have a better more accurate idea, call a great realtor. You can even call up a great appraiser. We have many of them in this county. And if you so desire, we can always help you here at John Jones Real Estate, 867-3020. Thank you.