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How does Zillow come up with their Zestimate of the value of a property?

I am looking at buying a property listed at $89900. The Zestimate is 62600 and I'd sure like to know why their estimate is so much lower before I make an offer.
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March 21 2012 - Belton
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Answers (3)

Profile picture for hpvanc
Zillow is but one source of information, there are other free AVM's out there to use although Zillow provides more information and easier to use features than the majority of them.  You can also pay an appraiser for a consultation or if you are using an agent ask them for a CMA and a raw list of comps.

To do further research using the Zestimate you need to determine how accurate they are in general for your area.  Look at the past 6 months of sold properties for your area and determine how much the Zestimates differed at the time of sales, and if there is a strong bias one way or the other.  It is better to use the "See sales similar to 123 Main St" link on the property page than to pull recent sales for the area using the zip code or neighborhood, the list generated from an individual property will have the statistical outliers removed, and since Zillow no longer marks these with an * people get bent out of shape or get the wrong idea.

Next determine if the individual property appears to be a statistical outlier within the neighborhood, i.e. does it have a comparable Zestimate to properties with similar characteristics within the neighborhood.  Use the map and click on nearby properties to see.  Final and perhaps most importantly take a look at the Zestimate range, if you have found that Zestimates tend to be accurate for your area, and that the individual property does not have anything about its Zestimate that stands out as unusual, use this to try to fit subjective items like view, condition, architectural features, and etc to the value.

Good luck!
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March 21 2012
Profile picture for wetdawgs
A Zestimate is a number generated with a statistical model run on a computer.   The Zestimate should never be evaluated by itself, but instead along side the value range.     Zillow only knows (and therefore uses) the public facts as well as the facts offered by the owner and/or agent.  The more data for the home and the area, the more likely that the value range is narrow.    Zillow doesn't use upgrades and other features that may add value because they don't have a way to gather than data consistently for all homes.

So, pull out the value range, the Zestimate, look at all the "facts" on the home (are they complete and accurate?).  Walk through the home and evaluate condition, has it been upgraded?    Have your agent do a CMA and evaluate the properties used in a CMA.

A Zestimate is a starting point for a comparison of properties, but does not substitute for in person visits and comparison of recent sold properties by people who've been in the comps.

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March 21 2012
Zillow is norious for lousy data integrity and incorrect zestimates, so be very careful about using this website to make any decision. Have you looked at the neighboring home zestimates compared to the one you are interested in buying? What is the price range of the property? are there unusual spikes in the zestimate history graph? has the owner claimed the home and edited the facts? If not it could be that Zillow is using totally wrong information. 

Sorry I can't be more specific but if Zillow needs a Government 'wealth warning' the same way as the Surgeon general has a health warning on Tobacco products.
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March 21 2012
 
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How does Zillow come up with their Zestimate of the value of a property?
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Latest answer by hpvanc
March 21 2012 | 3 answers
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