How Accurate is the Zillow Zestimate?
by Tim Ford
For the past few years, one of my more popular studies has been analyzing the accuracy of the Zillow Zestimate in the Bozeman market. For those unfamiliar, Zillow is a Real Estate website showcasing homes for sale. They also offer a “Zestimate,” which is their computerized model that generates a home value for individual homes.
The Zestimate has often attracted attention from critics who pointed out its inaccuracies. Zillow has never stated the Zestimate is perfect, but that it is a starting point for determining value. Their website states, “Zillow’s accuracy has a median error rate of 5%. This means half of the home values in the area are closer than the error percentage.” So how does the Zestimate fair locally here in Bozeman? To find out, I looked up the actual sold price of all homes sold in Bozeman city limits during the first 4 months of 2019 and compared each sale against the Zestimate for that particular home.
During these 4 months, January 1st through May 1st, 2019, 149 single family homes sold inside Bozeman city limits. Of those homes sold, Zillow either could not find the address or could not produce a Zestimate for 11 homes.
Including all of those remaining 138 sales, the Zestimate inaccuracy averaged 5.35%. However, there were quite a few
that were really off, one was 52% under the actual sold price, and 19 more were more than 10% off.
The average does not take into account that sometimes the inaccuracy was high and sometimes it was low. Of the 138 sales, 49 of the Zestimates were low, or under the actual sold price, and 89 were high. The median sold price for all 138 sales was $425,000. Therefore, for that median sold price, this average inaccuracy could result in a Zestimate somewhere between $402,262 and $447,737.
There was also something new this year that I hadn’t noticed in past years. For a small portion of the sales, Zillow is attempting to publish the actual sold price, and that information was way off. Montana is a non-disclosure state, meaning there is not a publicly available data base of sold property information like there is in some states. Of the 138 sales I researched, 24 of those sales included the Zestimate and a second number, appearing to be the actual sold price, including a sold date. But the sold number was nowhere close to the actual sold price. For example, one of the sales gave a Zestimate of $588,604, but also stated the property had actually sold on 4/12/2019 at a sold price of $416,900. However, this property actually sold on 4/10/2019 for $615,000. The other 23 sales that included a sold price were similar in their inaccuracy. For the public trying to research sold information, this could be extremely misleading.
The data shows that while the Zestimate may be accurate some of the time, it’s inaccurate often enough. Buyers and sellers can use it as a starting point, but additional information is needed to really narrow down a value. People should be very wary of any online site that claims to have actual sold information for properties in Montana and should always look for the best information from trusted sources when making a large purchase or selling decision.
I have also included recent sales data for the first 4 months of 2019. In addition to the 249 homes sold during these 4 months, another 164 home sales are currently under contract or pending as of the date of writing.
The included data reflects sales of homes in the greater Bozeman area, including Four Corners, Gallatin Gateway, Bridger Canyon, and Bozeman city limits. The data includes home sales reported through the local Big Sky Country MLS, and does not include private party sales, Condominiums, or Townhouses.