Are you wondering what your house is worth, so you looked it up on Zillow?
Here is the stark truth about online property valuations that every homeowner should know.
Do you know why online valuations like Zillow are unreliable?
As a homeowner, if you want to know the true market value of your property, this is where most people start, right?
It’s easy and convenient… but that comes at a cost of accuracy.
This post reveals the truth about online property valuations that every homeowner should know.
Why Online Home Valuations (like Zillow) Are Unreliable for Determining Market Value
As a professional real estate appraiser, it’s important to explain why online valuation tools like Zillow, Redfin, and Realtor.com should not be relied upon to determine the true market value of a property.
While these platforms offer convenient estimates, they have significant limitations that make them inadequate for formal valuation purposes.
Algorithmic Limitations
Online valuation models (often called AVMs or Automated Valuation Models) rely on algorithms that:
- Cannot physically inspect properties to assess condition, quality, or improvements
- Often use outdated or incomplete public records data
- Apply broad market trends that may not reflect micro-market conditions
- Cannot account for property-specific attributes that significantly impact value (they don’t know about your custom finished basement)
- Struggle to accurately value unique or non-conforming properties
Inconsistent Results Across Platforms
Different websites frequently provide wildly different valuations for the same property because:
- Each platform uses different valuation algorithms and data sources
- They interpret local market conditions differently
- Update frequencies vary between platforms
- Some incorporate user-submitted information while others don’t
Test it yourself with your own address.
Add your address to Google. The first 3 results are usually Zillow, Redfin and Realtor.com.
The 3 valuations are rarely the same.
Missing Critical Value Factors
Online valuations typically fail to consider:
- Property condition and quality of finishes
- Recent renovations or upgrades not reflected in public records
- Deferred maintenance or extensive repairs needed (plus zillow cannot smell cat pee, mold, cigarette smoke….)
- Views, natural light, and other subjective but valuable features
- Lot characteristics (topography, usability, privacy)
- Neighborhood nuances and hyper-local market trends
- Factors that influence buyer decisions
Real-World Evidence of Zillow Inaccuracy
Zillow’s own experience demonstrates the limitations of algorithmic valuations.
In 2021, Zillow shut down its home-flipping business after suffering massive financial losses.
The company ultimately lost approximately $881 million on its home-flipping venture before shutting it down.
This costly failure occurred because its pricing algorithms weren’t accurate enough to reliably value properties in changing market conditions.
Side note: Do you really trust a company for an objective opinion of value for your home when they are also trying to buy and sell houses? It’s a bit of a conflict, right?
As Zillow’s CEO Rich Barton acknowledged, “the unpredictability in forecasting home prices far exceeds what we anticipated,”
This admission highlights the fundamental challenge even sophisticated technology companies face when trying to automate property valuation.
Official Disclaimers from Online Valuation Sites
These companies themselves acknowledge the limitations of their estimates through their own disclaimers:
Zillow (Zestimate):
“The Zestimate is not an appraisal and you won’t be able to use it in place of an appraisal, though you can certainly use it as a starting point. We encourage buyers, sellers, and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.”
Source: the tiny disclaimer info at the very bottom of their estimate of your home.
Redfin:
“The Redfin Estimate is based on a proprietary formula and is for informational purposes only. It is not an appraisal, and it should not be used as a substitute for an appraisal or other valuation performed by a licensed appraiser. The Redfin Estimate may not include all home improvements or repairs, and Redfin does not have the ability to physically inspect homes. Redfin recommends that buyers, sellers and homeowners obtain professional advice about the value of a specific property.”
Source: the tiny disclaimer info at the very bottom of their estimate of your home.
Realtor.com:
“The Home Value Estimator is provided as an educational tool. It is not intended to provide a definitive valuation of a property. The accuracy of the Home Value Estimator varies by location and the availability of data in that location. The estimate is based on publicly available information and agent-reported transactions, plus mathematical calculations. It is not an appraisal. It should be used for informational purposes only.”
Source: the tiny disclaimer info at the very bottom of their estimate of your home.
The Value of Real Estate Professionals vs Zillow
Relying on an excellent property appraiser provides significant advantages over online estimates.
Pair the appraiser with your favorite realtor, and you are set up for success because you can depend on:
- Physical inspection of the subject property
- Detailed analysis of comparable properties that have actually sold
- Consideration of property-specific features and condition
- Adjustments for meaningful differences between properties
- Knowledge of local market conditions and trends
- Compliance with professional standards and methodologies
LEARN MORE: 7 Facts About Appraisals Every Homeowner Needs to Know
Key Takeaway
While online valuation tools can provide a general reference point, they should never replace a professional appraisal for determining market value.
These automated systems have so many limitations!
This means they cannot account for the many nuanced factors that influence your property’s true market value.
For an accurate home valuation, a real estate appraiser who applies market-specific expertise is essential.
And, if easy and convenient is what you need, Zen Appraisal’s goal is to provide that for you 🙂
Questions? Let’s chat.
This post reveals the stark truth about online property valuations (like Zillow) that every homeowner should know.
