Zillow's algorithm, it's just an algorithm, right? The computer looks to see what other homes in the area have sold for and based upon the tax role. Meaning what the bedroom count is, the bathroom count is, how many car garage it is, square footage of the house. It then says, okay, these houses aren't the same. They have those same qualities in common. So we're gonna give an overall value based upon what those types of homes are selling for and say, this is what the home is worth. But here's the problem within any kind of a software that gives a value, whether it's Zillow's algorithm or realtor.com or any of those other websites where you've got to really be cautious to take that truth or not because it doesn't take into consideration a few major factors.
Things The Zillow Algorithm Doesn't Factor In
Number one, Zillow's algorithm doesn't take into a factor. The absorption rate, it doesn't take into factor if there's any views or what the upgrades are, or are you in a court location or not, or do you have a pool? There's so many things that it doesn't take into factor it also doesn't and take into factor who, the agent that you were hiring to sell your home. Are they experienced? Do they know the area very well? Have they sold a lot of homes before in that area?
Do they know the difference about why certain homes sell or don't sell for more or less money based upon where they're at in a neighborhood or based upon the certain sun exposure I can go on and on about all the different things is that a computer software cannot determine as well as what a person that isn't as experienced, wouldn't even know to think about, to do when it comes to, to pricing or determining what they should value your home at.
Is Zestimate Accurate?
So the question is, is the Zestimate correct? Are these algorithms that you can go to online for an automatic evaluation of your home? Are they a correct? Well, I'll give you some examples. There's been plenty of times when this estimate or this online algorithm would say one thing, and we would sell the home for several hundred thousand dollars more than that home evaluation. In fact, in the video below I'll just add a little clip where it shows some different homes that I sold recently in our area and how the online algorithm, it was actually Zillow that gave the estimate right. Was one thing. And we sold it for a significant amount more. So you can kind of get an idea of what it is that I'm talking about.
The bottom line is this. If you are a real estate agent, or if you are a seller, or if you're a buyer buying to look at a home, just looking at the estimate or an online algorithm, that's gonna actually give you a price or tell you what a home should be worth. You have to be really careful here… Zillow actually on their website has a disclaimer that says that they need to be very careful with that because there could be a huge difference in the price of the home, to the assessment.
They even have a disclaimer of that on their website. So if their own website is telling you to be careful, you should be careful. I cannot tell you how many times I've gone to somebody's house and they say well “this computer says this”. I then say “it's just that it's a computer, right? It's not a person.” It's not looking at all the detail of your upgrades. Like you might have upgrades, but if your upgrades are upgrades that you bought at Kmart and there's other upgrades that we bought at restoration hardware, you get my drift, right? They are different. You cannot compare the two.
Zillow's Algorithm : Quality Is Everything!
You cannot compare the quality of something that you're gonna buy at Walmart to the quality you're gonna buy at Nordstrom's. And so, because of that, there are different prices. A home is the exact same thing. Think about things like the lands, gaping, the hardscape, the lighting fixtures is their granite. How much tile do you have? How new things are, how old things are. People will tell me that their house is super upgraded and then I'll go see it and it's upgrades from like 30 years ago. And unfortunately the old school Oak that worked back in 1980 does not exactly work right now in 2021, right? People are looking at totally different things and all that. You spent a lot of money back in 1980 or 1990 on your upgrades and you love them. And for that time they were beautiful and gorgeous.
They're kind of outdated now, and you're not gonna get the same amount of money for your home as somebody who has brand new upgrades. But even if you don't know that, just think about it. Can a computer give you an accurate analysis when it hasn't actually seen your home? It hasn't actually seen the upgrades. Seeing the lighting, seen the tile, seen the appliances, seen the view, seeing in the landscape, seeing the pool, seeing how well it is or isn't maintained. It can't do any of those things, right? It knows about what's sold recently, but it can't tell you what the absorption rate is, what the market climate is. We see markets changing in a matter of wheat.
All of a sudden it was hot as crazy. And then it kind of slows down. The computer cannot work that fast. So you've got to be to look at this estimate. I hope this was helpful.
