Erin DiFazio
Putting the Zestimate into Perspective

Two days ago the Zestimate for one of my listings was $834,000.00. Today it is $846,000.00. Has it actually appreciated by over ten thousand dollars in two days? Clearly not. What changed? I have no idea. Is it impacting my listing? You bet!

When a Zestimate is higher than a list price, many people interpret the property as being priced ‘under market value’ and a ‘good deal,’ while a listing whose Zestimate is lower than list price is often viewed as being ‘over-priced. In real estate there are several paths to achieving a reliable determination of market value and an ideal list price: a licensed agent or broker can perform a detailed market analysis of the property or an appraiser can perform an appraisal. Both go about this in a similar manner, looking at comparable properties both on and off the market, studying the condition of the building, trends of the neighborhood and industry patterns. One of the most important factors that goes into determining a list price is the subjective determination of desirability.

People do not purchase homes based solely on statistical research. They need to go there, be inside the walls, feel the space. Value is inherently subjective, beauty is in the eye of the beholder, no? And price is not a reliable indicator of value—we pay far more for our auto insurance than for our child’s asthma medicine, but clearly one has more personal importance.

Buying and selling a home are both times of intense emotional transition. Sellers have a connection to their home, it holds the memories of their family, has sheltered their sleeping bodies. They have worked hard to keep the counters clean and the gutters clear. They have probably painted the walls and made aesthetic choices that brought them pleasure. Buyers do not have a connection to the home yet, they view it through the lens of their life experiences thus far, their definitions of home, family, need and want. Sellers are looking to get the most for their property and buyers are looking to get the best deal.

As a professional, I can appreciate that the Zestimate is merely a small piece of a larger informational puzzle. Zillow describes the Zestimate with the words “It is not an appraisal” and acknowledges that in its algorithm, it “incorporates public and user-submitted data.” But for buyers and sellers, this data is all too easily taken out of context. Even though statistically, there is a significant margin of error and Zillow acknowledges that “The Zestimate’s accuracy depends on location and the availability of data in an area” the reality is that it may suppress or inflate the public’s interpretation of market value. As an individual with a natural skepticism toward corporate entities, this makes me a bit uncomfortable.

In the words of, “It is a bit of a crapshoot really”. I think this is an important thing to remember. Take the Zestimate with a pinch of salt.