The Chicago-based real estate search platform Truepad recently studied the accuracy of Zestimates, looking at the estimated price and comparing it to the actual sale price. The Zestimates tended to be off by an average of 13.1 percent, according to Truepad co-founder Paul Lazarre.
“It’s pretty common for single-family homes in a whole segment of one of the mid-level to upper-level neighborhoods, like Lakeview, Lincoln Park or Hyde Park, to be $100,000 off,” Lazarre says. “If an agent were to tell you that you should buy that home and offer $700,000 to $800,000, it wouldn’t fly at all.” It makes an agent’s job difficult, he says, putting them in a position where they must try to get the best deal possible for their client, but at the same time keep their clients’ expectations grounded in reality. It’s a difficulty many consumers deal with – even Zillow CEO Spencer Rascoff, who sold a Seattle home for a price 40 percent lower than its Zestimate, according to a recent article on Inman.com.
Combating those figures and tempering expectations is no easy task. Agents are often left to explain that the figures are derived from an algorithm, and that they do not have access to all of the factors that drive a home’s value. Even data that is public record, such as permits for renovations, may get lost or be incorrect.
“Even if Zillow came up with the original online estimate, you can get that elsewhere a thousand times over now,” says Guest. “I would much prefer to see more managing brokers or office managers embrace technology, and not just to the extent of building their own company websites – they should be telling agents to get their own sites or expand on what the company offers, rather than making it a landing pad.
“At the end of the day, it is up to the brokers to tell agents how to combat the problem, and to understand that the sites have disclaimers stating the information may not be accurate,” Guest says, noting that people tend to ignore that fact.