What is the value of a home? The quick answer is what a Buyer will pay for it. Most people when they ask that question are looking for n exact value or at the very least a range. Traditionally people have called Realtors or appraisers to answer 
I hear it all the time, “Zillow has my house valued at X”. Many times, this value is incorrect and I then have to work extra hard in proving what I think is the correct value. Therefore, I thought I would run some numbers and see how accurate Zillow.com actually is in my market. This is what I found:
The Method:
- Find all homes that have sold in the City of Boulder for the past month. (there were 58, so this is a limited sample size)
- Obtain the estimate of value from Zillow.com.
- Compare the sold value to the Zillow value in the form of a ratio.
- Find the standard deviation to find out how accurate each value is. The larger the standard deviation the more each of the values in the data set varied. For example if you found the the Zillow value was 100% correct with a standard deviation of 1%, you would know that Zillow was nearly perfect.
The Results:
There were 58 sales of single family homes in the City of Boulder between October 12th and November 11th. The price ranged from $245,000 to $2,800,000.
- The average ratio of Zillow prices to actual sold values was 99.4%. To put it another way, if you looked at the average Zillow.com price it would be just .6% lower than the actual value. Good right? Not so fast.
- The average was nearly right on the money but the individual values ranged from 158.2% of value to 48% of value a huge dispersion. The Standard Deviation for the entire data set is 18.4%. In other words the values are 99% correct +- 18%. A huge discrepancy. On a $600,000 home that would mean a the Zillow estimate is $600,000 +- $108,000.
- I next broke up the data set into three equal groups; sales up to $500,000, Sales up to $715,000 and the remaining 19 sales up to $2,800,000.
- For the lowest price range the Zillow value was 100.7% with a standard deviation of 10%.
- For the middle price range the Zillow value was 103% with a standard deviation of 14.6%.
- For the top price range the Zillow value was 94.8% with a standard deviation of 26.07%.
Conclusions:
- In the Boulder market Zillow is better at estimating the value of lower priced homes.
- As the prices rise the variables of bedrooms and baths matter less and the finish quality as well as intrinsic values such as location and view become more important. These later qualities are not easily picked up by a mathematical algorithm.
- Overall, Zillow is a fun way to look at a home but the accuracy varies so much that if you are serious in getting the right value you still need to call a Realtor or appraiser.
