The Zillow Zestimate
By Tim Ford – Real Estate Broker
For the past few years, I’ve been analyzing the accuracy of the Zillow Zestimate in the Bozeman market. For those unfamiliar, Zillow is a Real Estate website showcasing homes for sale. They also offer a “Zestimate” which is their computerized model that generates a home value for individual homes.
The Zestimate has often attracted attention from critics who pointed out its inaccuracies. Zillow has never stated the Zestimate is perfect, but that it is a starting point for determining value. On their website, they do state it is more accurate in some markets than others, and that “Nationwide, Zestimates are currently within 5% of the final sale price 52.9% of the time.” So how does the Zestimate fair locally here in Bozeman? This year, I took the largest sample yet by looking at the actual sold price of all homes sold during the first 4 months of 2018 and comparing each sale against the Zestimate for that particular home.
During these 4 months, January 1st through May 1st, 2018; 271 single family homes sold in Bozeman, including areas inside and outside city limits, but not including Belgrade. Of those homes sold, Zillow either could not find the address or could not produce a Zestimate for 45 homes.
Including all of those remaining 226 sales, the Zestimate inaccuracy averaged 9.9%. However, there were quite a few that were really off, one was 76% under the actual sold price, and 7 more were more than 40% off. Removing those sales brings the average inaccuracy down to 8.4%. That average does not take into account that sometimes the inaccuracy was high and sometimes it was low. The median sold price for all 271 sales was $450,000. Therefore, for that median sold price, this average inaccuracy could result in a Zestimate somewhere between $412,200 and $487,800.
Of the 226 sales, it was almost a 50/50 split between high & low Zestimates. 115 of the homes were estimated to be worth more by Zillow and 111 were estimated lower by Zillow. 76 sales, or 34%, were more than 10% off. The Zestimate was within 2% of the actual sold price for 35 sales, or 15% of the 226.
The data shows that while the Zestimate may be accurate some of the time, its inaccurate often enough. Buyers and sellers can use it as a starting point, but additional information is needed to really narrow down a value. Buyers and sellers should also know that Montana is a non-disclosure state, therefore there is not a publicly available database that compiles all the home sales as exists in many other states. People should be very wary of any online site that claims to have this information and should always look for the best information from trusted sources when making a large purchase or selling decision.
I have also included recent sales data for the first 4 months of 2018. In addition to the 271 homes sold during these 4 months, another 196 home sales are currently under contract or pending as of the date of writing.
The included data reflects sales of homes in the greater Bozeman area, including Four Corners, Gallatin Gateway, Bridger Canyon, and Bozeman city limits. The data includes home sales reported through the local Big Sky Country MLS, and does not include private party sales, Condominiums, or Townhouses.