At the heart of this tool is the Zestimate. The Zestimate (pronounced ZEST-ti-met, rhymes with estimate) is an
estimated market value of a home. They put a Z in front of the word
"estimate" because
it’s their favorite letter of the alphabet.

This is a Zestimate.

They compute this figure by taking zillions of data points — much of this
data is public — and entering them into a formula. This formula is
built using what our statisticians call "a proprietary algorithm" — big
words for "secret formula." Currently, they calculate a Zestimate for
more than 40 million homes. They are adding data all the time and in the
coming months they expect to add Zestimates for many more homes in the
U.S.

One eye of newt
… Actually, it’s less wizardry than mathematics. When their statisticians
developed the model to determine home values, they explored how homes
in certain areas were similar (i.e., number of bedrooms and baths, and
a myriad of other details) and then looked at the relationships between
actual sale prices and those home details. These relationships form a
pattern, and they used that pattern to develop a model to come up with
a market value for a home.

That’s
oversimplifying something that is incredibly robust and sophisticated,
but it’s the basics. Hundreds of home details feed into the formula and
the home characteristics are given different weights according to their
influence in a given geography and over a specific period of time. And,
because the details are always changing, the Zestimate is extremely
timely — it indicates the value of a home based on the most recent data
available in an area. They receive new data and update the Zestimate
daily to capture new sales in a neighborhood. However, there is a delay
between when the county is notified of a transaction and when they find
out about it. They might not know until next week about the sale of that
house down the street from you that happened last week.

They not only have Zestimates for homes now, they have used massive computing
cycles to go back in time to generate historic Zestimates as well.
You can see
a home’s appreciation in a chart that looks just like a stock table.
Your home is, after all, a major asset in your overall portfolio.

The
Zestimate is really a starting point in figuring out the true value of
a house. A variety of things can affect the accuracy of the Zestimate.
For example, the number of transactions in a geographic area affects
how much they know about prevailing market values of homes there. The
more transactions, the more data and the more accurate the Zestimate
will be. Also, they use public data for house attributes, and some areas
report more data than others. The more attributes they know about homes
in an area (including yours), the better the Zestimate. To correct for
this, they offer a tool called My Zestimator™ that allows you to adjust the Zestimate according to specifics about a home.

Their data shows that the majority of our Zestimate home valuations are
within 10% of the selling price of the home. Of course, to a certain
extent this depends on the accuracy of the home data they receive; see
their Data Coverage and Zestimate Accuracy table.
(You can refine the Zestimate using the "My Zestimator" tool, adding
things you may know about but they don’t, such as remodeling
information.) When it comes to unique homes (e.g., luxury mansions,
unusual designs) they are less accurate in their Zestimates.

They don’t have homing pigeons flying from land parcel to land parcel to
come up with the Zestimate for a house, but they DO have statisticians
who work all day — and some nights — with a huge amount of data. They
live and breath valuation models and tweak algorithms to get them closer
to actual market value.

The
Value Range (the numbers below your Zestimate) shows how much they know
about your home. The bigger the range, the less data went into
developing your Zestimate and the less certain they are about the worth
of the home. The smaller the range, the more accurate the Zestimate
because they have lots of information to go on.

It’s
true, they’ve never been to your house, never seen your expertise with
colors and landscaping. Only you know those things. So they’ve given you
a way to consider them in calculating a home’s value. Use the "Value
Any Home" search, then when you find a home, click on "Refine value of
this home." The My Zestimator tool will walk you through the steps to adjust your valuation.

The
Zestimate is not an appraisal and you won’t be able to use it in place
of an appraisal, though you can certainly share it with real estate
professionals. It is an estimate of the worth of a house today, given
the data they have available. Zillow.com does not offer the Zestimate as
the basis of any specific real-estate-related financial transaction.
Their data sources may be incomplete or incorrect; also, they have not
physically inspected a specific home. Remember, the Zestimate is a
starting point and does not consider all the market intricacies that
can determine the actual price a house will sell for, such as
entertaining offers, negotiating, closing costs, timing, etc.

No,
you can’t use it for a loan. To get a federally guaranteed loan, a law called FIRREA (the
Federal Institutions Reform, Recovery and Enforcement Act) requires an
appraisal from a professional appraiser. The Zestimate is their estimate
of fair market value, a starting point for home buyers and sellers and
anyone just plain interested in the value of houses. You can use it in
negotiating, in judging market trends, and in calculating all sorts of
things for your personal purposes.

The
data — believe it or not — is public. What? You’ve never seen it?
That’s because it is hard to find and hidden in multiple sources. They’ve
done the legwork for you by getting huge amounts of data from many
sources and creating something unique that the public sources don’t
provide — a Zestimate of your home based on the public data.

Click here to start your first appraisal.