Why are home values often undervalued/or overvalued on Zillow?

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November 01 2011 - Elkins Park
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Answers (7)

The zestimate is based on the information we have.  There can be a lot of factors causing the zestimate to be "way" off the mark.

We are less accurate on unique homes. If a home is 1000 sq, but sits on the top of a mountain with views of the pacific ocean---We do not know that.

If you have some examples you'd like me to look at, I'd be happy to.

That being said, here is a link with more information:
http://www.zillow.com/wikipages/What-is-a-Zestimate/
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November 02 2011
Zillow is basically taking the average home sales in the area, if the site isn't updated with all the amenities, then the average is given.
Hope that helps,
Lori Bost
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November 01 2011
Profile picture for Pasadenan
Zillow's estimates are also based on recently sold non-distressed property in the vicinity, modeled to the public records, including:
1) house sqft
2) lot sqft
3) # bedrooms
4) # bathrooms
5) # stories
6) year built
7) tax assessed value (adjusted for local rules)
8) last sold price extrapolated from sold date
9) covered parking (if in the county records).

Zillow does not factor in "price persistence", but tries to track the market as close as possible.

Five factors affect the wide tolerance range:
1) Wide range in what people are actually willing to pay and or accept for a given size... in a given area.
2) Narrow radius of properties considered in the vicinity
3) Short time frame for what is considered "recently sold"
4) Specific actual neighborhood boundaries are not used in the modeling
5) Only data that can be confirmed through public records is used, thus no site visits to determine maintenance condition or housing style or roofing type, nor any other amenities.  All these items are factored in based on the last sold price/date and the tax assessed value in the modeling.

Most Realtors do not have better numbers; they only think they do.
If it was so easy to estimate an approximate market value, the various estimating websites and software would come up much closer to the same numbers.  But markets don't work that way.  Just look at the wide range in price of an identical pair of Jeans for example.  You can buy what some are selling for $150 for as low as $10.
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November 01 2011
Realtor CMA's are based on recent home sales and/or actively listed comparable homes.  While not an exact science it is merely an estimate and nothing more.
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November 01 2011
Profile picture for hpvanc
I'm not saying that Zestimates are accurate.  However I haven's seen that they are worse than typical CMA's accept in non-disclosure states.

Do agents have any independently audited stats on how their initial CMA's hold up when verified against actual sales withing a short time frame of the CMA?  My experience is they have the same problem, and at least since the collapse of the bubble have a strong bias towards overvaluing.
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November 01 2011
Zillow is a good estimating tool but, as mentioned earlier, contact a local realtor for a more accurate estimate. 
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November 01 2011
Don't know.  It's a bit confusing for buyers.  Realtors are always the best source of information when it comes to home values!
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November 01 2011
 
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