A homeowner recently approached me to conduct a Comparative Market Analysis (CMA) for their North Shore property. For those unfamiliar with CMAs, they involve a thorough examination of recently sold, expired, and active property listings similar to the subject property within the same neighborhood. The aim is to establish a precise pricing benchmark for the home.
Upon completing my research and presenting the analysis, the homeowner expressed surprise at the difference between my home value estimate and the Zestimate she had found online – a sentiment familiar to many real estate agents.
So let’s take a look at what a Zestimate is and is not, and why it’s often unreliable.
What Is a Zestimate
Zestimates, provided by Zillow, are automated home value estimates generated using algorithms based on various data inputs. While they can provide a rough estimate of a property’s value, they are often unreliable for 3 main reasons:
- Limited Data Accuracy: Zestimates rely on publicly available data, such as tax records and sales history. However, this data may not always be up-to-date or accurate, leading to inaccuracies in the estimate.
- Lack of Context: This is a big one. Zestimates don’t take into account the specific condition of the property, any recent renovations or upgrades, or unique features that can significantly impact its value. As a result, they do not accurately reflect the true market value of a home.
- Market Fluctuations: Real estate markets are dynamic and can experience rapid changes in property values due to factors like local economic conditions, supply and demand, and seasonal fluctuations. Zestimates may not always capture these changes in real-time, leading to outdated or inaccurate estimates.
Zillow’s algorithmic estimates can feel hollow and opaque. Homeowners are presented with a number generated within a black box, devoid of any contextual information to support or defend the home value.
The limitations and risks associated with relying on algorithmic home estimates becomes even more clear when you consider Zillow’s staggering loss of $880 million in 2021, which was attributed to their use of Zestimates to guide their house flipping ventures. This ultimately led to the shutdown of their house flipping business.
Why You Should Get a Professional CMA
The value of a real estate professional’s Comparative Market Analysis (CMA) extends far beyond what you receive from a Zestimate. Unlike the automated algorithmic process of a Zestimate, a CMA involves the careful review and analysis conducted by a real human expert. They evaluate your home’s unique features and characteristics, comparing it to hand-selected comparable properties within the same neighborhood. This personalized approach mirrors the method employed by a home appraiser, ensuring a thorough and accurate assessment to inform and support the home value estimate.
If you’re interested in an updated home value estimate contact me and I’ll be happy to perform a Comparative Market Analysis to get you the most accurate number possible.