When it comes to finding estimated home values online, the two most popular sites are Zillow and Redfin. Zillow’s “Zestimate” and Redfin’s value estimates each offer estimated property values based on proprietary algorithms. These algorithms, as well as much of the data they use to arrive at estimates, are unavailable to the public, so it’s no surprise that they often produce numbers that are puzzlingly far apart.
So which estimate is more reliable and accurate? As a home seller, it can be tempting just to cherry-pick the highest number, but that’s not always the best choice. Further complicating things is the fact that there’s no “true” or “objective” home value; the “true” price of a home is whatever someone is willing to pay for it.
Any estimate you get from Zillow, Redfin, or any other source is going to be a guess at that price – an educated guess, but still a guess. That means that both Redfin and Zillow are trying to use data analytics to approximate the on-the-ground experience and “gut instinct” of a local real estate agent. There’s no substitute for an experienced agent.
That being said, a look at how Zillow and Redfin arrive at their estimates reveals that one of them is likely more accurate than the other. But to understand why that’s true, we have to look at what data goes into each estimate, how that data is processed, and how the companies’ business models diverge.
- Why Are Zillow and Redfin Estimates So Different?
- How Accurate Is Zillow?
- How Accurate Is Redfin?
- Is Zillow or Redfin More Accurate?
- Zillow vs. Redfin Listing Platforms
- Zillow Realtors vs. Redfin Realtors
Why Are Zillow and Redfin Estimates So Different?
First and foremost, Zillow and Redfin are completely different types of businesses. Redfin is a full-service, national real estate brokerage. That means their business is helping clients buy and sell houses; their website and analytics are essentially secondary to that main purpose.
Zillow, on the other hand, is not a real estate brokerage; technically, it’s a “third party data aggregator.” Zillow’s home estimates (“Zestimates”) are much more central to their company’s mission than Redfin’s.
But while both companies start out with the same raw data from local counties, Redfin incorporates much more information into their estimates; since they’re a real estate brokerage, they have access to MLS listings. While Zillow has negotiated it’s own partial data-sharing agreement with local MLSes, that allows them some leeway to use data, Redfin has much more freedom to use it in their analytics.
MLS access gives them an edge on the front end, but that doesn’t necessarily mean the end product is more accurate. It all comes back to the fact that their estimates are a means, not an end. Which is to say, their company’s ultimate goal isn’t to produce the most accurate home estimate possible; it’s to sign up clients.
“I have found Redfin to typically be on the high side and often not accurate,” says Susan Aviles, a real estate agent based in Charleston, SC. “As I understand, Redfin fishes for sellers so they put their numbers higher to get the clients.”
This makes sense in the context of Redfin’s business model. If sellers sign up with Redfin because their home value estimate was higher on Redfin’s site, they might not be disappointed when their home sells for significantly less, since they’re only paying a commission as low as 1%.
So does that mean Zillow’s Zestimate is more accurate? Let’s break down some numbers and compare the two side-by-side.
How Accurate Is Zillow?
The Zestimate has had a checkered past. A group of sellers tried to sue Zillow over the Zestimate’s inaccuracy and Zillow’s own CEO notoriously ended up selling his house for a whopping 40% less than the property’s Zestimate.
But in recent years, it’s gotten much more refined. Today, Zillow claims its valuations of over 110 million U.S. homes comes with a median error rate of 4% or less. That means that, half the time, a home will sell for a price that’s within 4% of its Zestimate. That’s a fairly impressive feat when you consider that a majority of those 110 million homes aren’t even on the market, making them much more difficult to assess.
That 4% median error rate puts it on par with many professional home appraisers, and many agents agree that Zillow has narrowly pulled ahead of Redfin in terms of accuracy. “In my professional opinion, Zillow has gotten quite accurate,” says agent Susan Aviles, though she disagrees that the Zestimate is as accurate as a professional appraiser.
“They’re not as close as a professional appraisal or a CMA from a qualified realtor who knows the area. As I understand, Zillow doesn’t adjust for the extent of renovations, age of roof, age of HVAC, possible value impediments such as busy road, power lines, unpopular floor plan or views, etc. Qualified realtors spend hours running the numbers to come to an estimated value and do take into consideration the latter.”
But while Zillow is the more accurate company overall, Redfin does have an edge in one particular area.
How Accurate Is Redfin?
Citing several independent studies, Redfin claims their estimates have a national median error rate of 1.77% on listed homes, and 6.66% on homes that aren’t on the market.
That means that, for homes that are actively for sale, Redfin’s estimates are within 1.7% of the final sale price, half the time. That’s impressively accurate. What’s not so impressive is their 6.66% median error rate for unlisted homes. This disparity could be explained by the reasons we discussed above – if Redfin is slightly inflating home value estimates for unlisted homes, to bring in sellers, their estimates for those unlisted homes would logically be less accurate.
Still, Redfin could argue that their error rate for listed homes is really the only number that matters, since they’re in the business of selling homes that are on the market, and because comprehensive information only becomes available for homes once they’re listed. This suggests that, if you’re a homeowner who’s looking to sell, you shouldn’t look up your own home on Redfin, if you want an accurate value; you should look up similar homes that are either on the market or have recently sold.
Is Zillow or Redfin More Accurate?
Looking at the numbers, it’s clear that Zillow is more accurate overall, but Redfin is more accurate on homes that are actively for sale.
This does come with some caveats, though. Those are national median error rates, so local markets have a lot of built-in variance. A Washington Post article found that while Zillow boasts some impressive median error rates in local markets, there were dramatic outliers when you strayed even slightly from the middle.
For example, Zillow has a 3.1% median error rate in the District of Columbia market, and yet a third of Zestimates in the District aren’t even within 5% accuracy. Same for Chicago, which had an overall error rate of 3.8%, but where over 41% of Zestimates weren’t within 5% accuracy.
The upshot? Your Zestimate has a good chance of being extremely accurate – but it also has a fairly good chance of not even being in the ballpark.
The deceptive nature of the median also points to a problem that’s bedeviled agents and appraisers for far longer than the internet’s been around; some properties are just easier to value than others. Let’s circle back to the point made above about how there’s no “true” home value to discover; there’s only an educated guess at what price the market will support.
This means that homes that are extremely similar are much easier to value, since there are more points of comparison. A home in a so-called “cookie cutter” subdivision can be confidently and accurately valued, just based on the sale prices of identical homes nearby. But unique homes have much fewer points of comparison, so valuing them is more of a challenge.
This is especially true for higher-end properties, where there’s much less demand, but where buyers are also much less financially constrained. A luxury home that’s listed for $10 million could be bid up by several million by two rival wealthy buyers, or it could languish on the market for a year before selling for $5 million.
The bottom line is that the more unique a property is, and the higher the price, the less accurate its estimated price is likely to be.
On the other hand, finding similar comparisons is the best way to find an accurate value for a home. There’s actually a name for this practice– it’s called a “comparative market analysis” (CMA), and it’s a report that details similar properties in similar areas, and uses those comparisons to produce a price range.
Agents like Susan Aviles use online estimates as a starting point, but then narrows that range down with a CMA. “[When collaborating with a client on a list price],I show them Zillow’s estimated range,” says Aviles. “Typically my numbers fall into that range and I back up my value numbers with not only solds in the last 12 months, but also active and under contract listings as well as cancelled/expireds.”
Real Estate Witch partner Clever Real Estate offers a free CMA from an experienced, local agent – with no obligation to sign! That means you’ll be able to get an accurate, professional, data-based preview of your home’s potential list price before you make a decision to sign with a Clever agent. Contact them today to start exploring your options!
Zillow vs. Redfin Listing Platforms
Both Zillow and Redfin offer thousands of property listings on their online platforms – but just as with their price estimates, they take slightly different paths there.
Since Redfin is a real estate brokerage, they populate their platform with listings pulled directly from the MLS. They update their website multiple times an hour, so when a new listing goes live, it’s on Redfin within minutes.
Since Zillow isn’t a real estate brokerage, they’ve had to put together separate data-sharing agreements for all the local MLSes, plus various other real estate data companies, to populate their site. Since all this data has to be managed and sorted, it takes longer for listings to show up on Zillow than on Redfin; one study concluded that it takes about a week for a listing to pop up on Zillow, once it goes live.
However, Zillow’s listing platform does include some properties that may not show up on Redfin. For example, Zillow includes “for sale by owner” (FSBO) listings on their site; these listings are never uploaded to the MLS, so they’re never auto-populated onto Redfin. Zillow also includes listings like foreclosures, pre-foreclosures, new construction, and rentals, many of which never make it onto Redfin.
While Zillow may not always represent the most accurate, up-to-the-minute overview of listings, they have more listings, total, than Redfin does.
Zillow Real Estate Agents vs. Redfin Agents
The Zillow and Redfin platforms are pretty similar, but the real estate agents they offer are where their offerings really diverge. Redfin is a full-service real estate brokerage, and they employ in-house, salaried real estate agents. If you choose to work with Redfin, your agent is a full-time Redfin employee, and they’ve been vetted and trained by Redfin.
Zillow, on the other hand, doesn’t directly employ any agents. One of their core business functions is to act as an advertising platform for agents – agents bid for certain percentages of exposure in a geographic area, and then appear as an option for that percentage of visitors. So when you click on an agent through the Zillow platform, you’re clicking on an agent who paid to appear on the site. That agent isn’t employed by Zillow, and may not have even been vetted.
This isn’t to say that agents who appear on Zillow aren’t professional or dependable – only that you can’t assume they’re qualified. Do your own research before you sign with an agent you found through Zillow.
Real Estate Witch has partnered with Clever Real Estate, a company that offers a guaranteed top flight agent experience. Clever has partnered with pre-vetted, top local agents and pre-negotiated a flat fee of $3,000 (or 1% if your home sells for over $350,000) for sellers. That means that sellers who sign up with Clever get all the benefit of an elite agent’s extensive, on-the-ground experience, at a price that’s a fraction of the usual 6% commission. It’s a fantastic deal, and truly the best of both worlds. Contact Clever today for a free, no-obligation consultation!
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