Should You Trust Zillow for Your Home Valuation?

by Kevin on January 8, 2009

I recently talked about adjusting our net worth on an annual basis. One of those adjustments was bringing down the value of our home to what the county tax assessor said it was worth.

One reader commented that I shouldn’t use that as a basis of the value of my home because rarely are they accurate. His recommendation was to use the real estate website Zillow instead.

For the uninitiated, Zillow estimates the value of your home based on multiple criteria. Essentially it is comparing your house to others in an area and gives a home value. You also put a “make me an offer” and “for sale” ad up on your home.

While the results may be great in some areas, I am still a bit skeptical. Here’s why:

  • I still believe in the power of having an assessor come out and value the home not only on its size, but also upgrades included inside of the house. Zillow doesn’t seem to take this into account.
  • This goes with my first point: relying on a computer system to give you a proper value for your house seems sketchy at best.
  • I believe Zillow relies heavily on public data from when the home is sold. For new neighborhoods like ours there isn’t much data to go off of. On top of that, our house (and entire end of the neighborhood) isn’t even on the map. No values, no homes, old data. Thus the valuation it spits out isn’t really accurate.
  • The information that was listed for the homes in our neighborhood was incomplete. Several homes has “0 bedrooms / 1 bathroom” listings and lower valuations.

The last point was the nail in the coffin for me. For our area it just seems there hasn’t been enough buying and selling activity to provide proper data to assign home values.

Tax assessors can be wrong. Zillow can be wrong. Real estate agents can be wrong. Valuing your home is tricky business. For now, we’ll stick with the tax assessor since we have to, you know, pay taxes on that value. This works for now since we aren’t selling any time soon.

How do you value your home? Do you count the value of your home toward your net worth?

{ 7 comments }

Ashley @ Wide Open Wallet January 8, 2009 at 9:50 am

I use Zillow when I’m curious to see what our house is worth. I wouldn’t base decisions on it, like what to sell it for, I would use a professional for that.

It does seem to be a little low and inconsistent. For example, it lists the house across the street from me about $30,000 higher and it’s smaller and backs up to a main street. So I know that’s not right. But I bet it’s pretty close as to the percentage the house has gone up or down.

Matt SF January 8, 2009 at 11:00 am

I’ve used a couple tactics, and drawn an average between them.

1) Check your mortgage statement. Some lenders will keep track of homes sold around you without you doing any work at all.
2) Check the online resale values of homes in your neighborhood. This can be inaccurate since it’s a buyers or sellers market depending where you live, or it will not post the final selling price at closing, but it can give you a decent range.
3) Call your lender and ask to refinance or get a home equity loan. They will probably know better than you what your home is worth, because in the end, their decision probably matters more than your own.

GetingUp January 8, 2009 at 7:47 pm

Zillow does not value my home, or any in my area. I could have a Realtor do a comparison for me, but I use the tax valuation for simplicity. It seems to go up gradually, and very seldom go down, but over the long term, it should be a pretty good indicator.

And yes, I do use it in my net worth calculation.

Mr. ToughMoneyLove January 8, 2009 at 9:27 pm

I think Zillow can help you track changes in value from year to year, even if the absolute values may be off. Also, you should absolutely track real estate as part of your net worth. If you are not building equity in your home, why do you own it?

Kevin January 8, 2009 at 10:46 pm

@Ashley: Yea, but the fact that it is simply off to begin with makes me really skeptical.

@Matt: I’ve looked to our online system and I don’t think our mortgage company does that. I’ve looked at what some of the homes are listed for and it’s definitely lower by a few thousand dollars — but those homes haven’t sold. Does that factor in with a mortgage company?

I also plan to call our mortgage company either tomorrow or later next week to ask about a possible refinance.

@GetingUp: Thanks for stopping by!

@TML: Ashley said the same thing, but it makes me nervous that it would off to begin with. Then again those values may be spot on. That’s the tough part about home values. There isn’t a set indicator that this house is worth this much, etc. It’s all dependent on what someone will pay for it.

Miss M January 9, 2009 at 3:29 pm

Zillow isn’t that accurate but it’s decent for a free online resource and easy to use. Their information is quite current, I’ve seen sold data pop up within a week of a home being sold. It’s also good for checking out your neighbors homes, size, number of bedrooms etc. I’ve used it to scan the homes in neighborhoods I’m interested in, to get a feel for the typical size, age, etc within the area. Los Angeles was one of the first areas they covered so their info is pretty complete.

Mike March 8, 2009 at 12:04 pm

You’re absolutely right – these tools are only as good as the information you have. If your home has some valuable price history information, then these home price estimation tools can be quite accurate. But if you have owned your home for many years, if you just purchased new construction, if your home has had major renovation – or is in need of major renovation – then these tools are not going to give you a reliable prediction.

I did a detailed study of the accuracy of Zillow and EstiMike on my own site – estimike.com. I found that Zillow and EstiMike can be accurate when you have useful property information. If you don’t, then I wouldn’t trust the results, either.

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