I just read this encouraging note from a homeowner in Cape Coral, FL.
Dear Zillow, I just had my house appraised, and you are very close. You estimate (the house) at 227,258, and the appraisal came in at 218,000. Thanks for the peace of mind and being so accurate especially with how the housing market has exploded in this area. Great Job!!
The feedback we receive is certainly not all this positive but what struck me here is that this writer considers a 5% variance from their appraiser’s estimate to be "very close" and "so accurate". I’d hazard a guess that for them, 10% would be "close enough". I’m not surprised by that, and I agree with them — it’s frankly magical that Zillow gets this close to actual market value.
What is surprising is that not everyone agrees. Some people actually consider 5% to be "way off", or rather "WAY OFF !!!". When we measure and report on our Zestimate accuracy, we count the percentage of Zestimates within 10% of sales value.
I recently chatted with a wonderful lady who is very distressed that her house’s Zestimate is 8% less than her neighbor’s Zestimate, despite both house’s having identical floor plans. A perfectly logical complaint yet that 8% difference would result from just a 4% variance in each Zestimate. For her, 4% is not close enough when comparing house values with the neighbors. And when Debi Averett concluded that Zillow is more accurate than list prices in Gilbert, AZ, she also held us to an extremely high standard; requiring Zestimates be within 1% of sale price to be close enough to be counted as accurate.
In a market where merely staging a home well can lift its sales price by $100K, it’s tempting to dismiss these folk as having unrealistic expectations. Instead, we’re learning that when it comes to Zestimate accuracy, expectations can and do vary greatly and that those expectations have everything to do with context — i.e. what do you use your Zestimate for? As a starting point to determine a house’s value, most Zestimates are surprisingly close. When listing or bidding on a house, Zestimates can be "WAY OFF!!!". And when comparing Zestimates with the neighbors, often only a relatively higher Zestimate will do.
So, this is your opportunity to let us know — in the comments below — how close is "close enough"? And what is the context in which you find your Zestimate useful (or not)?