Understanding Zestimates: When Do They Work and When Don't They?

Understanding Zestimates: When Do They Work and When Don't They?

  • 02/1/23

A Zestimate is an estimated market value of a home, calculated using proprietary algorithms by the real estate website, Zillow. It (or really any automated home valuation tool) can be an invaluable tool for those looking for a quick valuation, but it is important to understand the limitations of a Zestimate. It is not always accurate, and can vary widely from the home’s actual value. Knowing when and when not to rely on Zestimate can help homeowners make the best decisions for their financial future. This article will go into detail about the advantages and disadvantages of Zestimates and provide tips on how to make the most of them.

What is a Zestimate?

A Zestimate is an estimated market value of a home, calculated using proprietary algorithms by the real estate website, Zillow. It can be an invaluable tool for those buying or selling a home, but it should always be used with caution. The Zestimate is calculated by a computer algorithm that takes into account a variety of data points about a given property, including the current list price, the square footage of the home, a breakdown of the home’s features, the date the home was built, and recent sale prices for similar properties in the neighborhood. The computer then spits out a dollar amount that is supposed to represent the market value of that property. Zestimates are an estimate of current market value, which means they are subject to change as the market changes. The Zestimate will change if a homeowner adds a new feature, such as a deck or a swimming pool, to the property. It will also change if the homeowner makes major renovations, such as adding a second story or completely remodeling the inside of the home.

Advantages of using Zestimate

Depending on where you live, the cost of a home appraisal can be between $250 and $500, which is a significant portion of a mortgage closing costs. Appraisals are necessary when the home is being used as collateral for a loan, such as a mortgage or a home equity line of credit. They are also required when refinancing a home loan. Zestimates are free, so there is no cost to obtain them. This can save people thousands of dollars in closing costs. When an appraisal is needed, the homeowner can use their Zestimate as a guide for what renovations might be needed to bring the home’s value up to a level that is comparable to the Zestimate.

Disadvantages of using Zestimate

Like any program, Zestimate can make mistakes. It may not take into account all the features of a home, like the quality of the kitchen or the size of the backyard. In extreme cases, a Zestimate might be completely wrong. A few years ago, Zillow came under fire when they were accused of posting inaccurate Zestimates. The inaccuracies were so extensive that a few California attorneys general filed lawsuits against Zillow, arguing that the Zestimates were so far off they were actually fraudulent. Zillow responded to the criticism by improving the accuracy of their algorithms. Now, homeowners can file a correction request if they feel their Zestimate is inaccurate. In many cases, these requests are granted.

Factors that affect Zestimate accuracy

In order for Zestimate to be most accurate, the homeowner must complete their profile with as much accurate information about their property as possible. - Location: Zestimates are calculated based on the neighborhood where the property is located. If a home is located near an area with a high crime rate or a polluted river, Zestimate might be lower than it would be if it were in a nicer neighborhood. - Subdivision: The subdivision a home is located in can also affect Zestimate accuracy. Newer subdivisions tend to have higher property values than older neighborhoods, even if the homes are similar. Additionally, some subdivisions are gated, which can affect property values. - Market: The market conditions where a home is located can also affect Zestimate accuracy. A home located in a hot housing market, like California or Colorado, might have a Zestimate that is higher than it would be in a more stable market.

Tips for making the most of Zestimate

- If a Zestimate is lower than you think it should be, make sure all the correct information is listed in the home’s features. If it is, and the Zestimate is still low, don’t panic. It may be a sign the market is trending downward, which is normal. - If a Zestimate is higher than you think it should be, don’t try to mislead Zillow. Inaccurate information can cause the Zestimate to drop even further, making the situation worse. Instead, be honest when filling out the homeowner profile. That way, if the Zestimate does turn out to be incorrect, you can file a correction request.

Alternatives to Zestimate

- Home appraisals: While Zestimates are helpful, they should never be taken as an exact representation of a home’s value. The only way to know for sure what a home is worth is to have it appraised by a licensed appraiser. - Online home valuation tools: Some real estate websites, such as Redfin and Trulia, have their own home valuation tools. However, these are not as widely used as Zestimate, and homeowners may not be familiar with them.


A Zestimate is not an exact representation of a home’s value. It is an estimation, and is subject to change. Zestimates are best used as a starting point when deciding whether a home is worth buying or how much it should be listed for when selling.  When homeowners understand the limitations of Zestimate, they can use it to make better decisions. Zestimate may not be an exact representation of a home’s value, but it can help homeowners get access to quick information when first thinking about buying or selling a house. 


Turn to a real estate expert, like Jesse Dougherty, for a full Comparative Market Analysis if you are looking to make any significant financial decisions.


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