Tip: Stop using Zestimates for anything

[Ben Zimmerman]

While all of the seasoned war veterans out there already know that Zillow and their Zestimate should never be used for any sort of gauge of evaluating a homes worth, I still see this method thrown out there time and time again by many on this site as a good place to start, and then fine tune the price from there. I can't tell you how many times wholesalers have quoted me ARV values using Zestimates.

Zestimates use an automated computer algorithm to try to determine price, the problem often comes into play when the website pulls comps that aren't really comparable.  For example it might pull a comp that is a mile away in a different sub division, in a different school zone, and is not in any way 'comparable' to your home.  But what if it is pulling the data from the exact same house across the street in a cookie cutter sub division?  Shouldn't that data be similar and accurate?  -No.

I know what the Zestimates of my homes are because I use the Personal Capital app to consolidate my finances into one area and the app shows zestimates on it's homepage.

One day the value of one of my properties in Phoenix dropped by 20k in a single day, from 222k to 202k.  Intrigued, I opened the website and all of the comps it was pulling ranged from 218k to 230k but mine was apparently suddenly worth dramatically less than everything else in the neighborhood.  Then I noticed that the most recent comp was the house literally across the street in a cookie cutter sub division.  It had the exact same floor plan and finishings as mine, and had sold two weeks ago for 226k.  My home wasn't recently listed for sale or for rent, so why did it's "value" suddenly drop by 20k overnight to be worth less than every other home on the block?  -Who knows.

What I also found interesting was their forecasted growth rates.  Every single house on the block had a wildly different anticipated growth rate even though all of the homes were essentially identical.  Mine had the lowest anticipated growth rate of 0.5%, while the highest on the block was 6.2%.

So it is worth saying this again and again, please stop using zestimates for any portion of your financial analysis.  Their pricing isn't even accurate from one door to the next and can not be relied on for anything.