Should You Use Zillow Home Values When Pricing Your Investment Property? (2023)

Pricing homes to sell is an art. But with tools like Zillow home values, you might not need to wait around for a realtor. You might not even need help in figuring out a selling price for your property.

Table of Contents

  1. What Is Zestimate?
  2. Can Zillow Give an Accurate Estimate of Home Value?
  3. Benefits of Using Zillow Home Values
  4. Drawbacks of Using Zillow Home Values
  5. Should You Use Zillow Home Values?
  6. How to Accurately Price Your Investment Property
  7. Conclusion

While it seems like it would be a fast way to price your home and sell it quickly, there are some downsides to using Zillow home values. In this article, we’ll look at both sides of the story so you can decide whether or not you should use Zillow home values (Zestimates) when pricing your investment property.

What Is Zestimate?

Zestimate is Zillow’s estimate of the current market value of a home. It’s calculated by taking publicly available information about a home and using an algorithm to come up with a figure that reflects the value of the home as it stands today.

It is a starting point for home buyers and sellers to understand what a home is worth. It’s not an appraisal and it’s not an offer to buy or sell a home. To get an estimate of a home’s value, Zillow takes into account the prices of comparable homes in your neighborhood, as well as the local market conditions.

Zillow currently estimates prices for over 104 million Zillow homes for sale. The company’s data provides interested buyers or investors with comprehensive Zillow home values by address across the US housing market.

Can Zillow Give an Accurate Estimate of Home Value?

Is Zillow accurate for home values? If yes, how accurate are Zillow home values? According to the company, its national median error rate for on-market homes is 1.9%. It means that Zillow’s estimated prices for houses for sale listed on its website would show an average error rate of about 2%.

Zillow’s home value estimates are based on a combination of publicly-available data and proprietary algorithms. The public data includes information from local governments, tax assessors, county records, and other sources.

The proprietary algorithm considers a variety of factors in order to predict the market value of homes in the area, such as square footage, the number of bedrooms and bathrooms, lot size, age of the home, nearby amenities like schools and parks, and more. The more information that is available, the more accurate the Zestimate value.

Is Redfin More Accurate than Zillow?

Nationally, Redfin home value estimates are less accurate than Zillow. However, their accuracy varies from city to city and state to state, and Zillow home values by zip code are less accurate in some neighborhoods. While Zillow’s national median error rate is 1.9%, Redfin’s national median error rate is 2.57%.

Related: The Top 5 Real Estate Investing Websites for Making Money in 2022

(Video) Should I use Zillow, Redfin or Realtor Dot Com to price my home?

Benefits of Using Zillow Home Values

Using Zillow home values provides the following benefits:

1. A starting point for determining a home’s value

Zestimates offer a reliable starting point for determining a home’s value. They are a convenient way to get a general idea of the value of your home. That’s where Zestimates come in. They’re like an online version of the pricing system that realtors use—but they’re free and available to anyone with an internet connection.

The Zestimate data is updated frequently and uses proprietary algorithms to calculate its estimate of a home’s worth. The accuracy of the estimates can increase over time as more data is incorporated.

2. A home value comparison feature

Zillow offers a home value comparison feature that allows you to compare the price of your home to similar homes in your area. You will be able to determine how it compares with the average price of homes in the area. This makes it easy to see if the value of your home has increased or decreased since you bought it.

The feature is designed to help potential buyers and sellers make informed decisions about whether they should buy or sell, or whether they should invest in improvements that might increase the value of their home. You can also use the comparison feature to track how much appreciation has occurred in your neighborhood, so you don’t get caught off-guard by rising prices.

3. An evolving proprietary algorithm

Zillow’s proprietary algorithm is constantly changing to adapt to the real estate market. The algorithm came into fruition with Zillow’s launch in 2006, evolving significantly over time.

The algorithm is trained to use millions of home valuations across the US. It uses an extensive set of data from local public records and information about recent sales in order to estimate the selling price of a home in the past.

The Zillow home value estimator also uses more than 750 million data points provided by users who share information about their own homes, such as square footage, number of bedrooms and bathrooms, etc.

4. Adjustable estimates

Zillow provides an estimated value for every home. The estimate is based on the data you provide and then adjusted to reflect what the company thinks is a more accurate figure.

Information like square footage, number of bedrooms, bathrooms, location, tax documents, and other data are used to determine the initial estimate of a property.

The estimates are adjustable with Zillow. With more information, the company is able to provide more accurate and adjustable estimates for every home. The more information available, the more accurate home values on Zillow will be.

Drawbacks of Using Zillow Home Values

Along with the benefits, using Zillow home values comes with the following drawbacks:

(Video) Zillow Is LYING to You: This Is HOW to Properly Price Your Home

1. High error rate for off-market homes

Zillow home values come with a high error rate for off-market homes, which comes at a national median error rate of 6.9%. Unfortunately, it means that many off-market homes are valued at a lesser price than they should be, which gives buyers an inaccurate impression of their buying power.

It happens because there is no data on a home since the owner’s not submitted it to the site. Therefore, Zillow will estimate the home’s value based on comparable nearby homes. It means that you won’t know what your home is truly worth until you put it on the market.

Related: Zillow Rental Estimate: How Accurate Is It?

2. Doesn’t factor in upgrades to the property

Zillow is an excellent tool for researching the value of homes in your area. However, it’s important to note that Zillow does not factor in any upgrades to a property when calculating its value.

For example, if you’ve recently installed new hardwood floors or updated the kitchen, it will not be reflected in the calculations. Such ommissions can cause inaccuracies in the estimates you get.

3. Accuracy depends on housing turnover in your area

The accuracy of Zestimates depends on housing turnover in your area. If there is a high turnover rate and property sales are actively occurring, your estimates will be more accurate.

It is because the company can use local data from Multiple Listing Services (MLS) to supplement its own information. If there are few sales occurring and/or many properties are held for long periods of time, it may be difficult for Zillow to obtain accurate information on your home’s value since there aren’t enough comps.

4. Price signals from foreclosure re-sales are included

One of the biggest flaws of using Zillow home values is that it includes price signals from foreclosure re-sales in its data set. Re-sales are sales of foreclosed homes that were re-sold at auction.

The sale prices are typically lower than the original sales prices. It is because sellers must compete with other bidders and often can’t find the time to make repairs and upgrades before the sale.

Such properties are not an accurate representation of the market. They are often high-turnover properties neglected for months or years, and they often come with a host of unpleasant surprises.

Should You Use Zillow Home Values?

Zillow can be a useful tool when pricing your investment property. You can use the data to determine whether your property is priced competitively, as well as what comparable properties are worth.

However, you should use Zillow estimates with caution. The data is not always accurate and may not reflect the value of your particular property at all times. You should also be aware that a home’s value is often determined by its condition, location, and other factors not reflected in Zillow’s database.

(Video) Zillow Home Value Index (ZHVI) | Using Our Home Price Index

In addition to using Zillow home values, you should consider hiring an appraiser or professional real estate agent to help you price your investment property correctly.

How to Accurately Price Your Investment Property

Here are a few tips to help you come up with an accurate price for your investment property:

1. Look at comparable homes in your area.

The first step in determining the price of your investment property is to look at comparable homes in your area. You can do it by looking at several similar homes in your area that are currently on the market and recently sold. By doing this, you’ll get an idea of how much your home should be priced.

An estimate of what you can get for your property is helpful in determining what you should ask for it. Look at homes that are similar to yours in terms of size and features, and see how their prices compare with yours.

Should You Use Zillow Home Values When Pricing Your Investment Property? (1)

Looking at comparable homes in your area is the first step in determining how you should price your property.

2. Talk to an experienced agent or appraiser

It’s important to talk to an agent who has experience and training in your area. The real estate industry is full of technical jargon, and it can be hard to know what you’re getting into when you’re just starting out. Many people think that they can handle the process on their own, but this is often not the case.

If you want to get a good deal on your home, talk to an experienced agent or appraiser. They can help you figure out what’s realistic for your situation, and they’ll give you an idea of how long it will take to sell based on recent sales prices in your area.

The best way to find an experienced agent or appraiser is through word of mouth from friends or family members who have recently bought a home or sold one. They should be able to answer questions about your specific situation, such as whether it makes sense for you to buy or sell now, what types of properties are available in your price range and location, and more.

Related: The 9 Best Real Estate Agent Directories

3. Use Mashvisor’s Investment Property Calculator

Mashvisor’s Investment Property Calculator is a powerful tool for determining the value of a home. You can use it to determine what your property is worth. It uses both traditional and predictive analytics to help you find and analyze neighborhoods and properties in your area.

(Video) Is Zillow Accurate for Home Values | How to Update Zillow Zestimate

Once you enter some basic information according to your area and criteria, click the “Start Analyzing” button. The tool will then display relevant information about the property’s potential investment performance.

It will also show a list of other properties for sale in your area, giving you the opportunity to compare their prices, amenities, and other features to those of your own home.


Zillow home values are a valuable tool for real estate investors. It is easy to use and can help you determine what your investment property is worth. However, it doesn’t come without caveats.

The algorithm that determines these home values isn’t designed to take into account all of the nuances of each individual home or neighborhood; as a result, you may find that it overestimates or underestimates the value of certain homes in your area.

If you are interested in selling your property, you can look at alternatives to Zillow home values. Hire a professional appraiser or realtor who can give you an accurate estimate of value based on recent comparable sales in your area.

To estimate your potential ROI from your rental property – whether long-term rental or Airbnb – you should include Mashvisor’s investment calculator in your arsenal.

To start analyzing properties using Mashvisor, sign up for a 7-day free trial, followed by 15% off for life.

Start Your Investment Property Search!

(Video) Is The ZILLOW ZESTIMATE Accurate? // What's Your Home Worth?

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Is Zillow accurate for home values? ›

How accurate is the Zestimate? The nationwide median error rate for the Zestimate for on-market homes is 2.4%, while the Zestimate for off-market homes has a median error rate of 7.49%. The Zestimate's accuracy depends on the availability of data in a home's area.

Do real estate investors use Zillow? ›

Zillow is one of the most sought-after platforms for real estate investors looking for properties and market data. In today's post, we look at Zillow market data, what it offers, and how accurate it is. We'll also look at a better option that comes in where Zillow falls short. Let's start with the basics.

Is realtor or Zillow more accurate for home value? ›

A Realtor estimate, or a Comparative Market Analysis, should be more accurate and more detailed than an online valuation tool like a Zestimate. There are several reasons for this. First, real estate agents who know a particular area will be intimately familiar with the comparable sales.

Are Zillow home values inflated? ›

The Zestimate is often less accurate than your Realtor's estimate and can be thousands of dollars off. According to Zillow's Zestimate page, “The nationwide median error rate for the Zestimate for on-market homes is 1.9%, while the Zestimate for off-market homes has a median error rate of 7.5%.

Why does Zillow underestimate home values? ›

If your home has more value-factors (bigger square footage, better condition, more amenities, etc) than the comparables that are pulled, then your Zestimate is likely to be lower than actual value.

Which property value site is most accurate? ›

  1. Redfin. The most accurate home value estimator is Redfin as it uses historical pricing data and also considers real-time demand and market trends. ...
  2. Zillow. ...
  3. ...
  4. Trulia. ...
  5. Ownerly. ...
  6. Chase. ...
  7. RE/MAX. ...
  8. Homelight.
Jul 18, 2022

Who is the biggest competitor of Zillow? ›

For core listing services, is their biggest competitor. What site is better than Zillow? Zillow's real estate offerings are some of the most comprehensive, but Redfin and offer some comparable services, especially in terms of home valuation.

What apps do investors use for their real estate? ›

Real estate listing websites like, Redfin, Trulia, Zillow, and ZipRealty are good resources for finding both MLS and for sale by owner (FSBO) listings. Investors can search for homes using a variety of criteria, and all of the websites have apps for iOS and Android.

Does Zillow have a competitive advantage? ›

Competitive advantage

' Zillow's database at the core gives it an upper hand over its competitors. It has accumulated its data by scraping it through Multiple Listings Service (MLS). MLS is a local association of realtors which keeps their real estate data in one place.

What is more accurate than Zillow? ›

Redfin's home value estimator is more accurate than Zillow's when it comes to pinpointing the sales price. According to Redfin, its estimates are approximately 74% accurate within 5% of the sales price for listed homes. By comparison, Zillow is only 67% accurate within 5% of the sale price for listed homes.

Does Zillow overestimate or underestimate? ›

The good thing though is that Zillow never claims to be 100% accurate. The tool has an accuracy of about 80% in all areas. This is because there are no specific variances to throw it off. However, in some home value estimate cases (especially in older neighborhoods), the Zillow estimate won't be close at all.

What is the best valuation method for real estate? ›

The capitalization rate is a key metric for valuing an income-producing property. Net operating income (NOI) measures an income-producing property's profitability before adding costs for financing and taxes. The two key real estate valuation methods include discounting future NOI and the gross income multiplier model.

Why is Zillow overpaying for houses? ›

Its aggressive buying algorithms led to the company overpaying for properties, Velsey says, while materials shortages and price spikes made renovations more expensive.

Why are Zillow estimates wrong? ›

Zestimates are only as up to date as the data behind them, meaning they may be outdated or incorrect. Zestimates may not reflect improvements, mistakes in property taxes paid, or exceptions to tax assessments.

Why does my Zillow zestimate keep going up? ›

Zillow values homes based on an algorithm. When the algorithm changes, your estimate will likely change too. Zillow changes its algorithm frequently, with consistent small updates and occasional major updates.

How accurate are Zillow estimates 2022? ›

Zillow's Zestimate has been found to have a nationwide error rate of 1.9 percent for on-market homes. When it comes to estimating home values for off-market housing, the error rate jumps to 6.9 percent. Overall, Zestimate accuracy is between 95% and 96%, so it's pretty accurate in most cases.

Why you shouldn't trust a zestimate? ›

Zillow's algorithm only takes into account tax records and user-submitted data. As a result, Zestimates are typically off by 10% to 20%. Just like you wouldn't expect WebMD to diagnose your health problems, you shouldn't expect Zillow to accurately price your home.

What is the Zillow scandal? ›

By spring of 2021, the market had overheated to a point where Zillow's much-lauded algorithm, the backbone of its home-flipping strategy, was struggling to make accurate pricing predictions. Believing its own inflated numbers, say analysts, the company began overpaying for homes all across the country.

What is Zillow being sued for? ›

It's not what you think – it involves consumers and keystrokes. If your company maintains a website – whether offering financial products or just selling pet stairs – you now need to be familiar with state and federal wiretapping laws.

What problems is Zillow facing? ›

Zillow, facing big losses, quits flipping houses and will lay off a quarter of its staff. The real estate website had been relying on its algorithm that estimates home values to buy and resell homes. That part of its business lost about $420 million in three months.

Why did Zillow homes fail? ›

The company took its algorithmic-driven home-flipping business off the market last November when the tech platform failed to precisely forecast changes in home prices.

What is the 5 rule in real estate investing? ›

Multiply the value of the home by 5%, then divide that number by 12 to get your breakeven point. If the monthly rent on a comparable home is below the breakeven point, it makes financial sense to rent. If the monthly rent is higher than the breakeven point, it makes financial sense to buy.

What are the 4 real estate investment strategies? ›

When it comes to commercial real estate investment strategies, there are four main approaches: core, core plus, value added, and opportunistic. These investment strategies are not fundamentally different from each other–in all cases, investors buy properties with the goal of generating returns.

What are the 4 main methods to invest in real estate? ›

Real estate investments can occur in four basic forms: private equity (direct ownership), publicly traded equity (indirect ownership claim), private debt (direct mortgage lending), and publicly traded debt (securitized mortgages). Many motivations exist for investing in real estate income property.

What is Zillows failure rate? ›

But many projects like Zillow Offers go terribly wrong, and experts estimate failure rates that vary from 60% to 85%.

What type of real estate appreciates the fastest? ›

 Question: What type of property appreciates faster – condo, townhouse, or single-family? Answer: Since 2012, the data is clear – single-family homes appreciate the fastest, followed by townhouses/duplexes, and then condos. Since 2012, the average single-family home has appreciated 69% compared to 27% for condos.

Why is the MLS better than Zillow? ›

If you are able to view the MLS in your area online directly, you will only see properties that are currently active on the market. This makes the MLS more accurate than Zillow, which frequently keeps properties listed as available long after they have been taken off the market.

Does Zillow lie about prices? ›

In fact, Zillow's online pricing estimates are so unreliable, even Zillow doesn't trust its Zestimates! Starting in November 2021, Zillow announced it would write-off $500+ million in losses and shut down its iBuying business. The reason? They admitted their Zestimates were unreliable.

Can Realtors manipulate zestimate? ›

Yes you can manipulate Zillow values. I make edits to a property every time I sell a property to bring the Zestimate up.

What is the most common way to value rental property? ›

The Sales Comparison Approach

It is the method most widely used by appraisers and real estate agents when they evaluate properties. This approach is simply a comparison of similar homes that have sold or rented locally over a given time period.

How do you value an investment property? ›

The value of a rental property using the cost approach is based on the following formula: Value of Property = Cost – Depreciation + Land Value.

What valuation method does Warren Buffett use? ›

Buffett follows the Benjamin Graham school of value investing. Value investors look for securities with prices that are unjustifiably low based on their intrinsic worth. There isn't a universally accepted way to determine intrinsic worth, but it's most often estimated by analyzing a company's fundamentals.

Why do estate agents overvalue houses? ›

However, there are some agents who deliberately overvalue, and there is a pragmatic reason for this; If the valuation is substantially higher than anyone else's, customers are more likely to go with that estate agent. The estate agent gets the house on the market, and they collect their commission.

Why you should not overprice your home? ›

You scare off potential buyers

They (and their real estate agents) have a strong sense of what homes like yours are worth. A high price tag gives a buyer the impression that you have an unrealistic view of the home's value.

Are Zillow prices negotiable? ›

You may negotiate a three percent price reduction when an agent working for you could have gotten you five. Or you may not negotiate for any seller-paid closing costs when the current market standard is at least half. Whether or not you work with an agent, it's smart to research the property and the market.

Can you manipulate Zillow Zestimate? ›

After you've claimed your home, you'll be able to edit the information that Zillow uses to create a Zestimate by navigating to your home's page on Zillow and toggling over to the home view. They include: Home type (single family, duplex, etc.) Number of bedrooms.

Can a seller hide a zestimate? ›

No, but you can update your home facts and fix any incorrect or incomplete information to ensure that your Zestimate is as accurate as possible.

Is a zestimate close to appraisal? ›

The Zestimate is not an appraisal and it should be used as a starting point. We encourage buyers, sellers and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.”

Can realtors hide zestimate? ›

'” Zillow's estimate of a residential property's “fair market value” which the lawsuit states they know “to be inaccurate,” have allowed “only select brokers to conceal the display of Zestimates on their listings to the exclusion of the general public.”

How do I know if a real estate investor is legit? ›

Visit FINRA BrokerCheck or call FINRA at (800) 289-9999. Or, visit the SEC's Investment Adviser Public Disclosure (IAPD) website. Also, contact your state securities regulator. Check SEC Action Lookup tool for formal actions that the SEC has brought against individuals.

Does everyone use Zillow? ›

No, not all listings are on Zillow. There could be a lag between when a house goes on the market and when Zillow's feed pulls it in. If the agent is doing well, they may not sign up for Zillow's services or upload their listings.

Who are the investors in Zillow? ›

Top 10 Owners of Zillow Group Inc
StockholderStakeShares owned
The Vanguard Group, Inc.11.72%6,817,642
Independent Franchise Partners LL...4.15%2,417,666
BlackRock Fund Advisors3.48%2,025,621
Morgan Stanley Investment Managem...2.50%1,451,797
6 more rows

Can Zillow Be Trusted? ›

Zillow has been around for years, and it's become a trusted source for buyers, sellers, and real estate professionals. As a result, Zillow is one of the most popular sites for listing a home for sale or rent.

How do you determine if an investment property is worth it? ›

One popular formula to help you decide if a property is good investment is the 1 percent rule, which advises that the property's monthly rent should be no less than 1 percent of the upfront cost, including any initial renovations and the purchase price.

What should I not tell a real estate agent? ›

  • 10: You Won't Settle for a Lower Price. Never tell your agent you won't reduce the sale price on your house. ...
  • 6: You are Selling the Home Because of a Divorce. " ...
  • 5: You Have to Sell Because of Financial Problems. " ...
  • 2: You're Interested in a Certain Type of Buyer. " ...
  • 1: Anything -- Before You've Signed an Agreement. "
Feb 10, 2021

What is the 1% rule in real estate investing? ›

The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.

Is Zillow overpriced? ›

The tool has an accuracy of about 80% in all areas. This is because there are no specific variances to throw it off. However, in some home value estimate cases (especially in older neighborhoods), the Zillow estimate won't be close at all.

Is MLS better than Zillow? ›

Your State's MLS

If you are able to view the MLS in your area online directly, you will only see properties that are currently active on the market. This makes the MLS more accurate than Zillow, which frequently keeps properties listed as available long after they have been taken off the market.

What are analysts saying about Zillow? ›

The 19 analysts offering 12-month price forecasts for Zillow Group Inc have a median target of 38.00, with a high estimate of 52.00 and a low estimate of 24.00. The median estimate represents a -19.44% decrease from the last price of 47.17.


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