OfflineI see many people use Zillow to value a home, but are Zillow home values accurate enough to depend on? Zillow uses what they call a Zestimate to give values on homes. Many home buyers use Zillow.com as a basis for what their home or a home they want to buy is worth. Zillow has many great tools and a lot of information for homeowners and home buyers, but their home values are not always accurate.
Why should you listen to me?
I have been a licensed real estate agent since 2001; I sell over 150 homes a year and complete over 1,000 BPOs a year. I am also an investor who fix and flips 10-15 homes a year and I own 10 long-term rentals. I know values in my area, because that is how I make money. I think the best way to test how accurate Zillow values are is to compare what I know my properties are worth compared to what Zillow says they are worth. This article is not a scientific study, but a simple analysis. On my properties Zillow is as much as 40% off.
For more information on my investing strategy please check out my complete guide to purchasing Long-term rental properties.
How does Zillow determine home values with a Zestimate?
Zillow calls their home values a Zestimate. Zillow says they get their price based off a proprietary formula from public and user entered data. If you want to get a more accurate value from Zillow, you can actually change the details of your own house on Zillow. Zillow is very clear that their price estimate is a starting point for homeowners or home buyers and should not be the only data used when determining value. Here is more information from Zillow on how they value homes. Here is an article I wrote on how to value a house.
Zillow provides rent values on houses
Zillow.com also gives estimates for rent rates on properties. Valuing rents on homes is much harder to compare than house values. I use sold comparable properties to figure house values in most cases, but rental rates are much more difficult to value because rents are not published in most cases. I can use my current rents I charge on my rentals, but my rents may be low because the market has increased. Zillow does not give a rent estimate for all homes and only one of my properties had a rent estimate. Here is an article I wrote on how to market rents.
What are my properties worth compared to Zillow’s value?
I am going to go through each of my rental properties; what I bought them for, what I think they are worth and what Zillow says they are worth. I am holding these properties for the long run and have no plans to sell them. I am providing an accurate value for what these homes would sell for in our market right now. I have no reason to stretch their value as it does not benefit me since I don’t plan to sell them.
Rental property number one
I bought my first rental property for $96,900 in December 2010. It was my first rental and I got a great deal on the home. It is now rented for $1,100 a month. Zillow says the home is worth $145,797 and it should rent for $1,200 a month.
The rent is very accurate on this house, but my estimated value is about $170,000. If I listed it for $145,000 I would have five offers in the first two days and sell it for well over asking price. The current renters are at the end of their lease and rents have been rising. I bet I could get $1,200 or more a month now I was to rent it again.
Rental property number two
I bought rental property number two in October of 2011 for $94,000. I had to put $15,000 of work into it before it was rented and it has been rented for $1,100 a month since then. I know this rent is low as I rent it to my brother-in-law. I could rent it for at least $1,300 a month in today’s market.
Zillow’s Zestimate says this home is worth $151,000 and does not list a rent amount. If I were to sell this home I could get at least $170,000.
Rental property number three
I bought rental property number three in November of 2011 for $92,000. I put about $18,000 of work into it before it was rented and it is rented for $1,250 now.
Zillow says this home is worth $165,000 and the rental amount is not listed. (I am not sure why they list rent values in some, but not others) This value is much more accurate and I would estimate this house is also worth right around $170,000.
Rental property number four
I bought rental property number four in January of 2013 for $109,000. This home needed $15,000 in work before rented and had been rented for $1,300 a month.
Zillow estimates this home is worth $166,000, which is not too far off. I think this house is worth closer to $180,000 or maybe $185,000. It is larger than the other homes and has more features.
Rental property number five
I bought rental property number five for $88,249 in December of 2012. This home needed a lot of work and I spend about $20,000 on repairs before it was rented. It has been rented for $1,200 a month.
Zillow says this home is with $90,000 and I think they value it so low because I bought it recently. My estimate for the value of this home is at least $155,000. This is a case where the Zillow value is way off.
Rental property number six
I bought rental property number six for $115,000 in March of 2013. I put about $17,000 into it and it is rented for $1,300 a month.
Zillow says this property is worth $132,000 and again does not list a rent value. I feel this home is worth $160,000, which shows another big difference in home values possibly due to a recent purchase.
Rental property number seven
Rental property number seven was purchased for $113,000 in April of 2012. I put about $7,500 in repairs into this property and it is rented for $1,400.
Zillow says this home is worth $148,000 and does not list rent. This home is in a very hot neighborhood and is worth about $170,000 now. This was an awesome deal; I wish I could find ten more like it!
Rental Property Number eight
I just purchased rental property number 8 in November or 2013 for $97,500. I don’t have it rented yet and I have not started any of the work on it either. I estimate it will take about $15,000 to get it ready to rent.
Zillow lists the home as being worth $130,000! I thought this value was very interesting since I just purchased the home for 30,000 less than what Zillow lists. Zillow does list the recent sale prices so they know how much it just sold for. Once this home is fixed up I estimate it will be worth around $150,000 and it should rent for $1,200 to $1,300 a month. It is not fixed up yet so I will leave my purchase price as the actual value since I just purchased it. I do like to buy properties below market value though so it is worth a little more than the $97,500.
Should you trust Zillow values?
As you can see Zillow values can vary widely on different properties. Zillow lists values on some of my homes very low and on one pretty high. Here is a list of all the values for Zillow and my estimate.
Properties My estimate Zillow estimate Difference % difference
Rental 1 $170,000 $145,000 $25,000 15%
Rental 2 $170,000 $151,000 $19,000 11%
Rental 3 $165,000 $170,000 $5,000 3%
Rental 4 $180,000 $166,000 $14,000 8%
Rental 5 $155,000 $90,000 $65,000 42%
Rental 6 $160,000 $132,000 $28,000 17%
Rental 7 $170,000 $148,000 $22,000 13%
Rental 8 $97,500 $130,000 -$32,500 -25%
Overall I think Zillow does a good job of giving ballpark values, but do not depend on Zillow if you plan to buy or sell a home. The easiest way to get an accurate value on a home is to ask a local Realtor to complete a CMA for you, which should cost you nothing. As you can see from the above values, many Zillow estimates are pretty close, but some are off by over 40 percent! I would hate to be the person that sells their home for 40% less than market value or pays 25% more than market value on a home. The tricky part is there is no way for someone to know which values are accurate and which are not.
What can Zillow tell us?
As I mentioned it is hard to get accurate values from Zillow, but they do show recent sold comps in neighborhoods. Zillow also shows pricing trends, which tend to be fairly accurate in my opinion. That can tell you if prices are going up or down in certain areas. Zillow also lists homes for sale and local real estate agents. Overall I think Zillow has a lot of great information, but don’t count solely on their home values.mferguson
I had a 12 pack of houses I was purchasing in MO in late 2011 or early 2012 and the seller (a wholesaler) gave us zillow values, so when the appraisals were completed the properties appraised well under what zillow said for as-is values and they were so much lower the actual seller of record couldn't even sell them for what the lender had to work with let alone the wholesalers unwillingness to drop their fees down so I learned on my first package purchase not to use those values, and not only that but the lender figured I didn't know what I was doing because I didn't use real comps.
I consider myself new to re investing..have not made a deal yet, and have been using Redfin for a while. I like it fine and it seems to have a better rating than zillow and some others..I am also new to this site and have to say that it's been very inspiring and motivating..I believe I'm gaining traction and I am excited!
"I can do all things through Christ who strengthens me" Phil 4:13
Hello Randy
In your post, you mentioned above(see subject). May I ask where I can find this guide?
It is a good post, and it is my question too.
thank you very much
Fugui
Thanks all and I agree Randy & co. I use Zillow only as a starting point I go the sold comps & comp my props out from there sometimes & Zillow is awesome they do have like you said a lot of tools & useful info.
But I do use only sold comps from an agent to quide me in establishing ARV period, only sold comps. Thanks again.
Tony
Go faster do more! GFDM!