Real Estate February 22, 2024

Are “Zestimates” Trustworthy Indicators of Home Value?

In short, not really. Zillow relies on square footage and tax records to generate its “zestimate.” The process involves averaging the values of recently sold homes in the vicinity with similar square footage and dividing the result by the square footage in the tax records. While this method may be suitable for standardized neighborhoods, its reliability diminishes when applied to the unique dynamics of the Outer Banks real estate market.

Factors such as land value and location exert a significant influence on home prices, making the one-size-fits-all approach of Zillow’s algorithm less effective in diverse areas like the Outer Banks. For instance, when pricing an oceanfront property, I reframe from using other oceanside properties that are not oceanfront, even if they share similar square footage. I also would not use a soundside property as a comp for a property on the oceanside and vice versa. Location and proximity to the water is a huge driving factor of value in the OBX.

Zillow’s limitations extend to its inability to accurately discern between luxury properties boasting high-end finishes and builder-grade properties of similar size, and is unable to make adjustments for condition. These nuances play a crucial role in determining a property’s value but often get overlooked in Zillow’s automated calculations.

In conclusion, while Zestimates offer a quick reference point, it’s advisable to approach them with caution for both buyers and sellers. For a more accurate estimate of your home’s value, consider consulting with a local real estate agent or hiring an appraiser. If you’re interested in your home’s value, you can request a comparative market analysis directly on my website.

For additional insights into Zillow’s methodology and the potential pitfalls of relying solely on Zestimates, check out this informative article.