There’s been a lot of advice out there recently about which tools homebuyers, home sellers, or homeowners intending to refinance should use. Many people are choosing to make use of home estimate websites like Zillow or Redfin to conduct their research. So, we thought we’d take a brief look at how these two stack up against one another.
Before we jump off into comparison, it is always preferential to seek the advice of a local real estate agent in preference to algorithmic estimates of home value. The local agency will have the requisite knowledge and resources to answer price-related and other questions about your sale or purchase options.
Some readers may not be aware that the name “Zillow” was chosen as the company’s brand to reflect the “zillions” of data points the service makes use of. This matrix of data is what powers Zestimates, via algorithmically generated estimates of home values based on this huge pool of data. This Zillow feature is very popular with buyers and sellers for getting a general idea of a home’s market value. That said, the problem with Zestimates is that there are limited because of the relatively few data points that are fed into the algorithm. Lifehacker’s Emily Long put it this way:
“It’s easy to get caught up in Zillow’s automated home value estimates—Zestimates—when starting your (real or hypothetical) home search. But Zestimates don’t often reflect what a home is actually worth, nor what it’ll sell for in the end.”
The Zillow service efforts predict monthly costs for buyers by estimating things like mortgage payments, taxes, insurance, and so on. But, as useful as this may seem, most experts suggest potential buyers and sellers consult an appraiser rather than lend too much credence to the Zillow service. One of the biggest problems with Zetimates is that the data used to create the values is often dated. And any algorithm is only as good as the data fed into it. According to the latest data from daily updated Zillow data, Zestimates have a 1.9% margin of error for homes on the market and 7.5% for ones that aren’t.
Finally, part of the problem is not Zillow’s fault. By allowing user-provided data, the system is automatically subject to data errors. It should be pointed out here, that Zillow refers to its Zestimates as a starting point to determine home values. This means users should not consider these estimates as true appraisals. Readers should refer to this Investopedia report to learn more. Many rating sites put Zillow at the top where overal utility is concerned.
This service is a real estate brokerage offering online tools like Zetimates to home buyers and sellers. The system at Redfin works in much the same way as Zillow’s offering, only Redfin updates its date throughout the day, which lowers the margin of error a bit. The system is hooked to the MLS, and it is updated every five minutes according to Redfin.
This system is rated the most accurate by many experts, and the current data suggest Redfin’s estimates have a current median error rate of 1.71% for homes on the market and 5.76% for those off-market. Redfin also has an easy-to-navigate app, and the service shows recent home sales and median values in adjacent areas. Redfin was the first to introduce a map search feature, which makes them a pioneer of sorts. Unlike Zillow, Redfin is a true brokerage site that recommends its own agents.
Finally, it should be noted that Redfin’s accuracy leadership only slightly edges out Zillow and some other competitors. And their lead can change at any moment depending on several factors. Emily Landes, a real estate expert at SFGate said recently her research showed Zillow and Redfin accuracy fluctuating wildly in some cases. She says there is actually no way to determine which service is more accurate at any given time.
At the end of the day, either of these estimate tools should only be used as a guideline. Both Zillow and Redfin have advantages, depending on user needs and preferences. Likewise, both systems have major disadvantages that if not taken into consideration, could cost thousands of dollars when the ink is dry on the sales contract. Both Zillow and Redfin use their own proprietary formulas, and they weigh their data in different ways too. As I said earlier, there still is no substitute for a professional appraiser.