The Zestimate Home Value Explained

The Zestimate® conversation: some real estate agents avoid it; others conquer it. The conquering crowd would tell you they see the Zestimate as an opportunity to distinguish themselves as local experts around town. They’re the Zestimate whisperers.

The first step in becoming a Zestimate whisperer is to learn what the Zestimate is and how it’s made. You have to pop the hood and look at the nitty-gritty data that shapes the Zestimate and its accuracy. Let’s dive in.

What is the Zestimate?

The Zestimate is an estimated value of a home, crafted by a complex, ever-evolving series of data models designed by expert economists, mathematicians, statisticians, and computer scientists at Zillow. It’s essentially a starting point in the long (and sometimes painful) process of uncovering how much a home is worth in current local market conditions.

Most real estate agents would tell you the Zestimate doesn't replace an appraisal, a comparative market analysis (CMA), or even a simple walk-through or inspection.

How is the Zestimate calculated?

The recipe for the Zestimate is constantly evolving. The main, ever-present ingredient is data, broken down into three categories:

1. Physical attributes of homes, sourced from both public and user-submitted data, including location, square footage, lot size, number of bedrooms and bathrooms, and other details.
2. Tax assessments and other tax assessor information.
3. Past sale records for the home itself and nearby or comparable homes.

Zillow's data experts run the data through a series of proprietary economic models to calculate the Zestimate and the Zestimate Value Range, which shows the high and low estimated values of a home. The data produced by the different models is continuously analyzed and compared with real home sale prices, which causes the Zestimate model to change and improve over time.

How accurate is the Zestimate?

The Zestimate’s accuracy depends on the amount of home information available in a given area. If your county provides robust, detailed data on homes such as home size and sold transaction information, then the Zestimate will be more accurate.

Nationally, the Zestimate has a median error rate of 7.9%. Here’s a little exercise to help visualize what that means:

1. Imagine that all the homes on Zillow are in one room (a very big room).
2. Place all the homes with accurate Zestimates on one side of the room, and all homes with inaccurate Zestimates on the other side of the room.
3. Arrange the homes in an ordered line, from most accurate Zestimates to least accurate.
4. Grab the home in the very middle of the line, the median home.
5. A median error rate of 7.9% means that the middle home’s Zestimate would be off from the actual sale price by only 7.9%. It could be 7.9% too high or 7.9% too low.

Keep in mind that the Zestimate is less accurate in neighborhoods without many recent transactions or areas where the homes are unique. For example, homes in luxury markets face the problem of having many custom features, which aren't accounted for in the Zestimate model.

If all this talk about median error rate and Zestimate accuracy makes you hungry for more specific stats on your local area, you can binge on Zillow’s data coverage and Zestimate accuracy table. You can also check out the even larger, all-encompassing home data feast Zillow's analytics team serves up free of charge.

Can the Zestimate be updated?

The Zestimate model gets most home information from public data, but these records can sometimes be limited, outdated, or flat out wrong. To improve Zestimate accuracy, homeowners should claim their home and update their home facts on Zillow. In some cases, changes to home facts can be significant enough to update a home’s Zestimate over time, which typically happens slowly over a two-month period.

What is the Zestimate forecast?

The Zestimate forecast is Zillow’s prediction of a home’s Zestimate one year from now. Keep in mind that economic forecasting essentially attempts to predict the future, which is a tough task. That said, data from housing indicators and other general economic indicators can certainly help estimate future home values to some extent.

The Zestimate forecast model uses a number of housing indicators such as mortgage interest rates and property tax rates, and economic indicators such as population growth and changes in household income.

An individual property’s characteristics, including its features and past sales behavior, can also affect the Zestimate forecast. You can find more in-depth information about forecast accuracy and methodology here.

Calculating the Zestimate and its forecast is a sophisticated process that focuses on hard data. The process doesn't ever involve physically visiting or inspecting homes. The Zestimate isn't called a Zappraisal or a Z-exactimate for good reason. It’s simply another tool, an estimated value that can be used to start painting the picture of a home’s true worth.