Why a “Zestimate” is the “Sex Panther” of home valuation

When I first purchased a home in 2011, Zillow was just starting to really become a “thing”. It didn’t have the monstrous standing that it now does in the real estate community, and was primarily a tool for prospective buyers to find available homes to sell. The introduction of the Zestimate; a tool for homeowners to track the value of their home, really brought the data driven aspect into the online real estate market. Just how accurate is that Zestimate in estimating your fair market home value? All of that depends, and every time a homeowners says “Zillow says my home is worth $XXX,XXX” I think of this amazing interchange between Will Ferrell and Paul Rudd in Anchorman discussing a rare cologne called “Sex Panther”

First, I love this scene. The absolute silliness and interaction of Will Ferrell and Paul Rudd always gets me, and I especially love the line: “They’ve done studies you know…..60% of the time it works EVERYTIME (Rudd)…..That doesn’t make sense (Ferrell)”. Did you know that Zillow actually lists their success rate on actually valuing a home, both while active and non-active? You can check those stats out via this link: Zillow Zestimate Accuracy. Zillow will actually change their zestimate for a home depending on whether or not it is active for sale or off market, which to me, is the 100% largest reason it should not be utilized as an accurate way of determining your fair market value. Zillow actually tracks their accuracy for active vs non active homes and lists it on their website (if you dig deep enough in fine print). here is what they have listed on their accuracy in Larimer County:

For a home that is not currently on the market, zillow accurately gets the eventual sale pricing (IE market value) of that home within 20% of the sale price, 90% of the time! Sounds a bit like the sex panther quote doesn’t it? That’s a pretty huge swing in pricing accuracy….so if a home was valued off the market at $450,000 for instance, like a listing I just put on the market below, lets see what that 20% range of sale price would look like

Off Market Accuracy of the Zestimate


I took this screenshot of my latest listing and its value right before we listed at $470,000

So based on Zillows data, their off market valuation of my clients home is within 20% of its market value with 90% accuracy. That means that the valuation of $450K is within a final valuation swing of $360,000-$540,000. I’m pretty sure I could tell my clients that range without even driving by the house. If we look at the 10% valuation bracket, that means that they give a price swing between $405,000-$495,000 with 71% accuracy. Finally, the least accurate model says that they would be within 5% of value 46% of the time, and in this case, that give a price bracket of $427,500-$472,500. Given that we put the property on the market at $470,000 and already had 2 offers in the first 24 hours of being live, I don’t think we are going to be within that 5% or 10% accurate bracket anymore. Maybe it stays within the 20% bracket, but again, when it comes to pricing, I don’t see many homeowners/sellers loving to hear that their home could sell within a $180,000 range…..they don’t need a realtor or an algorithm for that kind of info!

On Market Accuracy of the Zestimate


I’ve found that most homeowners don’t know that Zillow changes their Zestimate once a home hits the market. It actually took me a bit of time to realize that this was the case, but it certainly is a way to help skew their accuracy data.

Once we went live, the Zestimate changed to $526,400….random, or is it?

Once my listing went live, the zestimate changed $75,000 in value. Here is exactly what is said on the zillow website about the on-market zestimate.

When a home goes on the market, new data can be incorporated into the Zestimate algorithm. In the simplest terms, the Zestimate for on-market homes includes listing data that provides valuable signals about the home’s eventual sale price. This data isn’t available for off-market homes.
— Zillow

Originally, I found it a bit random that they decided the new value would be exactly $526,400, until I did some simple math from my list price of $470,000. It turns out, the new zestimate is exactly 12% above the listed price ($470,000 * 1.12 = $526,400). If we had listed at $450,000 would the new zestimate be 12% above that price? Would Zillow adjust based on where it was listed? Certainly, the accuracy of their zestimate will increase as real estate professionals look at actual sale data which compare all variables (location, size, style, condition, amenities) in order to price homes accordingly in the market. If Zillow is using realtors price valuations and then applying algorithms to those market values based on previous sales data, it may actually start to get a bit more accurate in predicting a final sales price, but at this point in the process, the zestimate doesn’t matter as much to a homeowner, they are already selling!

Actionable Advice for Homeowners

We all like to keep tabs on how much our home is worth. It seems like a middle class national past-time to know that your investments are moving in a positive direction, but at this moment, I would only rely on Zillow for general trends in data as opposed to actual market valuations. Zillow tried running an entire business model off of their zestimate program where they would purchase homes directly from homeowners, cutting out the “middle-man”. According to a recent article in Wired Magazine (See whole article here: https://www.wired.com/story/zillow-ibuyer-real-estate/)

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers, the company’s home buying program, would result in too much earnings and balance-sheet volatility,”
— Zillow cofounder and CEO Rich Barton

Use zillow, realtor, redfin, homebot, etc to keep track of the trends on you home, but when it come time to actually make a decision regarding selling, refinancing, opening a HELOC, etc, I highly recommend you reach out to a real estate professional to get an accurate assessment of your asset. I’m happy to help out and promise that I won’t wear “sex panther” when we meet!









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