Blog posted On March 07, 2019
Real estate websites like Zillow and Redfin are a great resource for home buyers or homeowners looking to get an idea of the value of a home they are interested in buying or refinancing. Like any free tools, Zillow and Redfin’s valuation estimate tools are not 100% reliable. Homeowners upgrade homes over time, some neighborhoods have homes with comparable attributes, while other homes are more spread out and very different from their nearest neighbors. Understanding that free real estate resources will not be perfect every time, who has the most accurate estimate tool: Zillow or Redfin?
An independent study showed Redfin had a median national error rate of just 1.77% for homes that are currently on the market, and a median national error rate of 6.66% for homes that are not currently on the market. As of February 2019, Redfin has a total of 74.4 million properties in its database, 1.3 million that are listed for sale, and 73.1 million are off market. Zillow does not segment its margin of error by homes that are currently listed for sale versus homes that are off market. Currently, Zillow’s median national error rate is 4.5%. However, Zillow has enlisted the support of data scientists around the world to reduce its median national error rate to 4.0%.
For many professional appraisers, a 4% median error rate is acceptable, however it’s important to understand that a median national error rate can be skewed. In new home communities, where homes are based on select plans the margin of error will likely be lower. In rural communities where homes are more spread out, there will be fewer neighbors to compare to, and likely a larger margin of error. In communities where homes are older and fewer homes have been recently sold, the data will be older and thus the margin of error will be larger.
For example, in Chicago, IL the median Zestimate error rate is 3.8% and in Washington, DC the median Zestimate error rate is 3.1%, both acceptable error rates. However, 41.4% of Zestimates are not within 5% of the actual sale price. If you’d like to see the margin of error in your city visit www.zillow.com/#acc and www.redfin.com/redfin-estimate.
While real estate websites can help you get an idea of what your home is worth or a home you are looking to buy, real estate professionals have access to other valuation tools and listing services, including the MLS. Through the MLS, Realtors and real estate agents get early access to listings before they are public. Professional appraisers are also trained to value all of the specific details of a home including upgrades, age, area, and other factors that may not be detected by generic valuation algorithms.
If you have any questions about the value of your home or a home you would like to buy, consult a real estate professional.
Sources: Chicago Tribune