It is my opinion that Zillow’s Zestimate® is worthless. If not absolutely worthless, close to worthless, certainly in our case.
The last time I wrote regarding Zillow’s Zestimate® I suggested that you should take their estimate with a great deal of salt. Not just Zillow, but also Redfin. I mentioned that I was suspcious of their so-called proprietary algorithm because it appeared that they had simply reduced the value of our property because we reduced the selling price.
Well, we have now confirmed this to be the case. Zillows estimate shouldn’t be taken with a grain of salt, it should be ignored altogether.
Our property is on Iron Canyon in the Sand Canyon are of Santa Clarita. We recently reduced the asking price by $22,000. We are eager to move for personal reasons so we are willing to sell our property below current market value. How do I know it’s below current market value ? Let me provide 2 examples.
Within the last 12 months 3 properties have sold on our street. The first is 1.9 acres, our property is 2,13 acres. The primary home on that property is almost 3,000 sq. feet and they have some rental space above a 5 car garage. That property sold for $1.6 million last October. The owners, after purchase, spent approximately $100,000 fixing that property before moving in. Their real property cost was, therefore, more than $1.7 million and a price well over the current $395 per sq. foot we are currently asking.
Property number 2, much closer to the very busy busy Sand Canyon road, sold for $1.5 million early in 2019. That property has a larger house and a large barn. Unfortunately for the buyer, the roof leaked. As a consequence, the buyer spent well over $100,000 reparing the roof, ripping out walls and cleaning out mold. So this properties actual cost to the buyer was over $1.6 million, never mind the inconvenience, and a price per square foot well over what we are currently asking.
Property number 3 is even worse. Property number 3 was sold for approx. $1.4 million this summer. It is a larger house, close to 5,000 sq. feet and has a pool. The acreage is close to 1.5 acres. The buyer of this property had the unenviable task of having to remove ALL the flooring and replace all of the floor joists and sheating due to rot and black mold. Additionally, the crawl space had been flooded and there was less than 12 inches due to mud filling the space. Two months later the buyer is still waiting for replacement tile. Having done all of the work himself the buyer estimates that his total cost of repair is over $200,000 but, had he hired a contractor, it would have been well over $400,000. Actual purchase cost for this property is $1.6 million or more. Again, a price per square foot well above our offer price.
On the other hand, our property, while a smaller square footage still has 4 bedrooms and 4 bathrooms, 3,000 square feet, 2.13 acres and no pool. Furthermore, there are no maintenance / repair issues. We have kept our property up to date so when we set our price, there are no additional costs.
When doing a market appraisal, one considers the features of the property being offered / sold / considered compared to the features of recent sales in the area. As there are 3 sales within the last 3 months on our street it’s hard to get more relevant data, if not impossible. Our property is larger than all three of the comparisons above at 2.13 acres. It is on a quiter section of the street, closer to the end of the cul-de-sac and 1/2 mile from the noisy Sand Canyon. We have, essentially, the same number of bedrooms and bathrooms. We don’t have a swimming pool like 2 of the properties but we do have a sound proof recording studio. In all, our property, considering the cost to add a swimming pool and additional square footage, is well below comps.
All that aside, Zillow maintain that their algorithm is proprietary and reasonably accurate. Well, property values in the Santa Clarita Valley have risen more than 3% over the past year according to independent analysis. Apart from that, it really isn’t much of an algorithm to simply reduce an estimated property value by the same amount by which a seller decides to reduce their asking price.
In summary, Zillows Zestimate®, proprietary or not, is essentially worthless and sellers and buyers would do well to ignore it. In the end, the correct price for a property is that at which both sellers and buyers agree to a transaction and still may not reflect local market values. In our case, because we have personal reasons for moving so are willing to sell below market value.
Zillow isn’t alone in this, Redfin follows exactly the same path.
Zestimate® is a trademark of Zillow and is used under trade mark “fair use” law.