I recently read a really interesting blog article by an appraiser in Philadelphia titled “Zillow vs. The Coyle Group.” In the article, Michael Coyle looks at more than 20 of his most recent appraisals and compares them to what Zillow says they’re worth through his Zestimate. Since sites like these seem to be gaining in popularity with consumers in recent years, I thought I’d do my own review.
The results may surprise you, they did to me. Of the 20 properties analyzed, many of which were recent sales, Zillow differed from the appraised value by more than 5% in 16 of them and the average difference was 20.16%! And the four that were within the 5% were recent sales in the last 6 months. That means, with the median home priced at $300,000, Zillow’s appraised value is outside of an average of $60,000. Another interesting statistic is that there were 10 high/overvalued properties and 10 low/undervalued properties. To further corroborate my results, I compared them to The Coyle Group and noted that they found an average difference of 18.95%.
Digging deeper into the individual properties, I was unable to pinpoint what exact factor led to some of the biggest discrepancies. For example, the Glencoe Colonial property is currently an 1,100 square foot property. ft. split level to be demolished and a new 3,200 sq. foot built house. It is listed for $1,199,000 (the exact Zestimate value) and is under contract for around $1,050,000. This would lead me to believe that Zillow is giving the most weight to the MLS list price and ignoring the actual features of the property. However, the Zestimate had a 41% discount on the Portage Park bungalow, which was listed at $460,000 and sold for the same price. In this case, why would the Zestimate be $273,265? It must have ignored the list and asking price when it seemed to be based solely on the list price of Glencoe’s proposed construction. Yeah, I’m scratching my head too.
While I’m not here to break down Zillow’s method or algorithm used to determine values, I do want to warn the prospective home buyer/seller not to trust Zillow values and advise them to hire a certified appraiser to make sure. that all factors have been included in the opinion of market value. This will prevent your home from being listed too high, which could lead to your home being on the market much longer than it needs to be. It will also prevent you from listing your house too low and potentially leaving money on the table.
You can read Zillow vs. The Coyle Group here.