Homeownership9 min read

What Do Real Estate Sites Really Tell You About Your Home?

By Noah - May 13, 2020

Are sites like Zillow and Redfin really accurate?

Take good care of your home, and it can develop value over time. But how much is your home really worth?

It’s easy to look up home estimate numbers online. It’s harder to know what to trust. Figuring out how online estimates work, and where their limitations are, can help you manage your home as part of your overall financial plan.

What Are Real Estate Data-Based Websites?

Top real estate websites gather data about millions of properties throughout the United States. They use algorithms to crunch data from public records, property details, and user-submitted info. Based on this info, they come up with an estimated value for the home.

If you’re interested in learning more about your local market or an area you’re considering, real estate sites are a fantastic tool. But whether a site’s algorithm is sensitive enough to give you accurate, up-to-date data about your home isn’t always for certain.

What Is Zillow?

Zillow leads the online real estate marketplace in terms of traffic and popularity. Zillow acquired Trulia, another leading real estate website, in 2015, further expanding its reach.

Zillow features a range of information that can help real estate shoppers decide the next steps in their homeownership journey:

  • Monthly payment calculator
  • Local information about schools, crime, and attractions
  • Mobile app
  • Recently sold properties for easy market comparison
  • Zestimate

What is a Zestimate, and is it accurate?

Zillow’s most attractive feature, and possibly the main driver for the site’s popularity, is the Zestimate. A Zestimate is a home value estimate, based on public and user-provided data and calculated with Zillow’s algorithm.

Sounds good so far, but for most homeowners, the real test is whether the Zestimate is accurate for your house.

Zillow’s median nationwide error rate is 1.9% for on-market homes. In other words, a Zillow estimate for a home that’s on the market will be within 2% of the selling price half of the time. For homes that aren’t currently on the market, the nationwide error rate is 7.5%.

Your area makes a difference in Zestimate accuracy, too. In Washington, D.C., a Zestimate falls within 5% of the sale price 91.8% of the time. In San Francisco, that drops down to 62.7% of the time.

Zestimate can usually give you a good baseline estimate for your home. But even a small percentage variance can translate to thousands of dollars’ difference, so build wiggle room around any estimate you read online.

Why is my Zestimate so low?

If you’re hoping to sell your home in the next few years, then the higher your home value, the better. So it can be seriously disappointing if the Zestimate is lower than you’d hoped.

Outdated or inaccurate information could lead to a low Zillow Zestimate. Data about comparable homes (comps, in industry-speak) that recently sold in your area can also affect estimates. Low comp prices could make your estimate drop. If your neighbors have all remodeled and you’re still grooving in a 1970s kitchen, your Zestimate might be inflated by modern comps, too.

It’s also possible to go in with high expectations. You take pride in your home, and rightfully so! But sometimes that love doesn’t translate into dollars. Hardwood floors may add a lot of value to your daily experience at home, but upgrades don’t always come with a major estimate increase.

What Is Redfin?

Redfin is a real estate brokerage site. Redfin’s claim to fame is pioneering map-based search for real estate listings online, and their business model claims to give customers more value when they buy or sell a home.

Is Redfin or Zillow more accurate?

Redfin boasts a 1.73% median error rate for homes that are on the market. That’s lower than Zillow’s 1.9% median error rate nationwide. So is it that simple to say that Redfin is more accurate?

A nationwide error rate isn’t a guarantee that the algorithm will be right on the money for your specific house. Zillow’s data estimates a 1.4% error rate for Denver, Colorado (which would beat Redfin’s national average) and says 99.7% of Zestimates are within 20% of the final sale price. But that’s a lot of money — and what if you’re in the 0.3%?

Overall, it’s smartest to check both Redfin and Zillow but use both estimates as starting points. A professional appraiser who visits your home can give you an estimate that includes the most updated, thorough information.

Is Redfin good for selling?

Redfin uses multiple listing service (MLS) data to collect information about market listings. In an MLS, real estate agents share info about for-sale homes and split commissions. Everyone gets a broader market to match buyers with homes, and agents may be willing to accept a smaller commission if they’re getting more business.

In 2019, Redfin and Zillow agreed to cooperate to share listings so that buyers and sellers could reach a wider audience. The CEO of Redfin admitted the deal is delicate because Redfin and Zillow compete in some areas, but if both companies continue to see a benefit from working together, this agreement may stick around.

Redfin charges a lower-than-average listing fee, 1-1.5% versus a typical 2.5-3%. One possible downside is that some sellers complain that their experience with Redfin was too impersonal, or that they felt rushed to lower their home’s listing price and sell quickly. Your local market and personal preferences make a big difference in determining whether a site like Redfin or a traditional real estate agent experience is best.

How Can Homeowners Use Real Estate Websites to Their Advantage?

At times, financing your home to take advantage of equity you’ve built can help you reach other important financial goals. In order to know if that’s a smart step for you, you need to understand your equity and your home’s overall value.

Checking real estate websites can give you a sense of how your local market behaves. A homeowner in a bustling market will map out a different strategy than someone in a quieter town with little real estate turnover. You can check your own home’s estimated value (keep in mind that off-market estimates are less accurate). You can also search for recent sale prices on comps yourself to see if they’re coming in close to your estimate.

If the market looks favorable and you’re interested in a home financing agreement to meet other goals (like paying for college), then you can feel more confident about choosing the right time to reach out to a financing partner like Noah.

 

Managing your home is a lot like managing any other investment. Considering information, watching the market, and seeking information that’s specific to your situation will put you in the best position to get the most out of your home’s true value.

 

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