How Accurate is the Zillow Zestimate?
by Tim Ford
For the past few years, I’ve been analyzing the accuracy of the Zillow Zestimate in the Bozeman market. If you haven’t heard of Zillow, it’s one of the many websites that utilize an MLS feed with homes for sale. It also offers a “Zestimate,” which is its computerized model that generates a home value for individual homes.
The Zestimate has been known to cause issues in real estate transactions, both from buyers and sellers that take it as an absolute for the home’s value. For most major markets, Zillow states it is within 10% of the final sale price more than 95% of the time.
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 2020 and compared each sale against the Zestimate for that particular home.
During these 4 months, January 1st through May 1st, 2020, 141 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 18 homes.
Including all of those remaining 123 sales, the Zestimate inaccuracy averaged 4.13%. The inaccuracy was better in the lower price ranges and further off in the higher price ranges. For homes under $500k, the Zestimate inaccuracy averaged 3.3%. For homes above $500k, it averaged 5.2% and for homes above $700k it averaged 6.7%.
In past years of comparing sales, the Zestimate was split more equally between being high versus low. However, this year, it was high most of the time. Of the 123 sales, 15 of the Zestimates were low, or under the actual sold price, and 108 were high. The most inaccurate sale was 58% off, and 13 sales were off by more than 10%. To compare it to that national average, it was within 10% of the sold price 89% percent of the time. Considering Bozeman’s median-priced home is around $500k, that could produce a swing of $50,000 in either direction.
The data shows that while the Zestimate may be accurate some of the time, its inaccurate often enough. Buyers and sellers can use it as a starting point, but additional information is needed to really narrow down a value. According to Zillow, “It is not an appraisal and it should be used as a starting point. We encourage buyers, sellers and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.”
I have also included recent sales data for the first 4 months of 2020. In addition to the 247 homes sold during these 4 months, another 149 home sales are currently under contract or pending as of the date of writing.
The included data reflect sales of homes in the greater Bozeman area, including Four Corners, Gallatin Gateway, Bridger Canyon, and Bozeman city limits. The data include home sales reported through the local Big Sky Country MLS and do not include private party sales, Condominiums, or Townhouses.