Content of the material
- Different Ways To Get A Home Appraised
- The Problem With Redfin vs. Zillow Home Value Estimators
- Zillow’s Home Estimates as a Starting Point
- What Can Cause Errors in a Redfin or Zillow Home Value Estimate?
- Redfin Estimate vs. Zillow Zestimate
- Off-Market Comparison
- On-Market Comparison
- Our Verdict
- Zillow And Redfin Pricing Algorithms Will Need To Catch Up
- Example #1 Of A Bad Pricing Estimate
- Example #2 Of A Bad Pricing Estimate
- How do I know if my home estimate is accurate?
- For Further Reading
- So, which is better?
- Work With a Realtor For the Most Accurate Pricing
- Zillow vs. Redfin comparison
- How Appraisers Assess Value
- About Zillow
- Cost of Using One of the Best Home Value Estimator Sites
- Here are more articles you might enjoy:
Different Ways To Get A Home Appraised
Zillow and Redfin’s pricing estimates are only one source for estimating the value of a property. Asking real estate agents who recently bought or sold homes in your neighborhood to give you their pricing opinions is another way. It’s also free and you get to learn what they are seeing.
Paying for a professional home appraisal is another common method. The appraiser also uses recently sold comps and does cost-to-rebuild and price per square foot calculations. But even these paid appraisals are sometimes done with errors.
Ultimately, to come up with the most accurate price for a home, you have to do your own due diligence. Triangulate all information available to get an accurate pricing estimate. This way, you can buy or sell more confidently.
Let’s explore why Zillow and Redfin pricing estimates can be so off. Then, we’ll discuss how we can use their bad pricing estimates to our advantage when buying or selling a home.
The Problem With Redfin vs. Zillow Home Value Estimators
With either the Redfin Estimate or the Zillow Zestimate, the estimated value of any given home is only as accurate as the available data. If your home has additions or renovations that don’t show up in the data, then its estimated value will not reflect those changes.
Errors do happen, so your value also may be low because of outdated or incorrect information about its previous sales prices or tax history.
Zillow’s Home Estimates as a Starting Point
The Zestimate is formulated to give website visitors a range of value. It’s not meant to replace an appraisal nor a real estate professional’s opinion. Many agents might take a gander at Zillow values before visiting a seller, because they know the seller is looking at those values. However, real estate agents do not use Zillow to price a home.
In some cases, agents will tell their clients to look at a home’s price on Zillow to justify how good of a deal they are getting when buying a home (provided that the Zestimate is much higher than the actual sales price, of course). It’s a selective usage with agents. When the price is to their advantage, they might use it as evidence for their client. Even banks don’t know any better, so in a short-sale situation for example, when the offer is more than a Zestimate, a short-sale agent might point to the Zestimate when in negotiations with the short-sale bank.
Zillow offers so much more for the consumer than the Zestimate aspect. Viewers can get so hung up on the Zestimate that they overlook the wealth of other information on the website, including comparable sales and neighborhood demographics. All of these can be invaluable to any first-time home buyer or home seller in a real estate transaction.
What Can Cause Errors in a Redfin or Zillow Home Value Estimate?
A common reason for inaccurate estimates is outdated information. For example, if you have made major additions or renovations that don’t show up in the data that Redfin or Zillow have collected on your home, then their estimates may be too low.
Redfin Estimate vs. Zillow Zestimate
The Redfin Estimate and Zillow Zestimate are two competing home value estimation tools. Since they will sometimes give two different numbers for the same property, not surprisingly, users are curious as to which tool is more accurate.
Is the Redfin estimate or Zillow Zestimate more accurate? As we’ve covered in Can the Zillow Zestimate be Trusted?, Zillow has a median error rate of 1.9% for on-market homes and 7.5% for off-market homes. So according to these self-reported numbers, Zillow’s Zestimate tool tends to be more accurate for both, when compared to Redfin’s (3.02% for on-market and 8.69% for off market).
So many factors impact the estimates, though, that sometimes Redfin will be more accurate, and sometimes Zillow will be more accurate.
One way Redfin pulls ahead is with transparency. Zillow offers very little information apart from the Zestimate number itself. Redfin, however, automatically pulls up the properties it’s comparing your property to, as well as a map of where they’re located. This makes it a lot easier to understand whether Redfin is accurately accounting for the features and updates (or lack thereof) your home has.
Here’s an example of how different the estimates can appear for the same off-market house located in Philadelphia’s popular Bella Vista neighborhood.
- Zestimate: $295,300
- Redfin estimate: $353,794
As you can see, there is a range of over $50,000.
Using Redfin to look at recently sold properties, for roughly comparable homes (under 1,000 square feet, 2 bedrooms), the very lowest a home in this neighborhood sold for in the last 3 months for was $296,000 – with an average selling price of $354,300. However, these homes still averaged 915 sq. ft ($387/foot) – whereas this is a 756 sq. foot home.
While at first, it seems like the Redfin estimate is more accurate based on what’s sold recently – if we take square footage into account and assume each square foot is worth roughly $387, then based on this information alone, the Zestimate seems closer to what the actual sale price would be.
The actual selling price, though, may differ yet again if the home is either extremely dated or has recent updates when compared to recent homes sold in the area.
Here’s an example of a current on-market home located in Philadelphia’s hot Northern Liberties neighborhood.
- Listed Price: $599,000
- Zillow Zestimate: $598,700
- Redfin Estimate: $587,527
In this example, both estimates are a lot closer to the listed price, likely because the sites had more property information to work with. However, there is still a difference of over $10,000 between the two estimates.
We chose Zillow as a top option because it has a database full of listings that yields estimates with a 1.9-percent on-market and a 6.9-percent off-market median error rate. Redfin is a solid runner-up choice, with a 2.24-percent median error rate for on-market homes and a 6.74-percent rate for off-market homes and an easy way to get a free comprehensive analysis.
Zillow And Redfin Pricing Algorithms Will Need To Catch Up
Unless Zillow and Redfin want to see their reputations decline, they will have to improve upon their bad pricing estimates. Otherwise, its users will stop trusting Zillow and Redfin and go elsewhere. Losing trust will also hurt their iBuying business.
Despite the pandemic, we are in a housing bull market. If you are obsessed with tracking real estate like me, you will realize Zillow and Redfin’s pricing algorithms are behind the times. Many homes are selling for above asking and above Zillow and Redfin’s own estimates.
Here are two examples of some very off pricing estimates. I’ve decided to use Redfin’s pricing estimate because Zillow’s pricing estimates tend to be even more off.
Example #1 Of A Bad Pricing Estimate
A 3-bed, 4-bath, single family home sold in February 2021 for $3,425,000, or $630,000 over asking. Given the square footage is not listed, chances are high the home is under 3,000 square feet.
Here’s where it gets interesting. Some of you might be thinking that the home was obviously underpriced to get such a high price. However, I’m not sure $2,795,000 is that underpriced for a home that is probably close to around 2,800 square feet. This is where we should compare the final selling price of a home to an online estimate.
Redfin’s estimate for the home is $3,011,416, or $413,584 less than the actual sale price of the home. Being off in price by ~5% is within a reasonable range. But being off by 14% is really bad. Data gets thrown out left and right after such a huge margin of error.
It seems as if Redfin’s pricing algorithm lacked sufficient data (square footage of home not listed) and isn’t properly forecasting the future. As demand for single family homes surge across the country, Redfin’s pricing algorithm is still stuck in the past.
The other theory as to why Redfin’s pricing estimate for this particular home is so bad, despite collecting so much data about homes since its founding in 2004, is that Redfin is purposefully keeping the price estimate low. Perhaps Redfin tried to buy the home for about $3,000,000 in order to resell it for a 14% gross profit.
Example #2 Of A Bad Pricing Estimate
Here’s a nice 4-bedroom, 3.5-bathroom Mediterranean-style home that sold for $4,000,000 on Mach 4, 2021. The selling price was $705,000 over asking, or 21.4%.
Listing the home for $3,295,000 seems a little low for a home that is 3,627 square feet. Although anything over $3,000,000 is a lot of money, using a price per square feet of $1,000 is a good rough barometer in this neighborhood. Can you guess what Redfin’s estimate is?
Redfin estimates the home is worth $3,502,272 or $497,724 less than what the home actually sold for. I’m guessing that Redfin’s algorithm decided to lower the price per square foot given you tend to get better value per square foot the larger the home you buy up to a certain point.
Therefore, we can’t fully frown upon Redfin’s $3,502,276 or $965/square foot pricing estimate. That said, Redfin’s price estimate is once again 14% off from the actual $4 million sales price.
Redfin has a full year’s worth of home sales data since the lockdowns began in March 2020. If Redfin’s data scientists had read any one of my articles since the pandemic began, it would know that real estate prices have been robust.
So what’s really going on here? Redfin has to either admit that despite having so much data, its pricing estimates still aren’t reliable. Or, Redfin is purposefully low-balling its pricing estimates in order to buy homes at a discount to market.
I’ve got endless more examples of bad pricing estimates, but I’ll stop here.
How do I know if my home estimate is accurate?
The best way to find out if your home’s Zestimate or Redfin Estimate is accurate is to get a professional home valuation (or CMA) from a top local real estate agent.
When an experienced agent performs a CMA, they’ll examine your home personally to assess its features and conditions. This evaluation, along with their on-the-ground knowledge of your local market, enables them to give you an accurate picture of what your home is really worth.
Ready to get a professional home evaluation? Our friends at Clever can connect you to a top-rated local realtor from a trusted brokerage like Berkshire Hathaway or RE/MAX. Clever also pre-negotiates huge savings for you! With Clever, you can sell your home for a $3,000 or 1% commission, saving you thousands on realtor fees!
For Further Reading
- Should I Sell My House and Rent Until the Market Cools? Advice for 2021
- How to Sell Your House: Houwzer’s 5 Step Home Selling Guide
- Houwzer vs. Redfin: What Home Sellers Need to Know
So, which is better?
Both companies are reputable and offer consistent quality. The “best” choice depends on what services you need.
If you’re thinking of selling your house as a FSBO, Zillow is the clear choice, since Redfin doesn’t take FSBOs.
If you’re looking for lower prices, Redfin wins out. As a discount broker, they’ve negotiated lower commissions and buyer rebates.
For iBuying services, since the initial estimates are free and have no obligations, your best bet is to request a cash offer from each company and compare.
If you’re looking to buy or sell a home with a traditional Realtor, UpNest can help! We’ll match you up with three to five of the top Realtors in your area. These local experts will offer you discounted commissions and buyer rebates, saving you hundreds or even thousands when you buy or sell a home. And because we only work with the very best agents, you’ll be getting top-notch service every time.
UpNest is a no-cost service for home sellers and buyers to find the best real estate agents locally. The UpNest platform allows you to compare multiple agents in your area so you can compare reviews, commission rates, previous sales, and more.
Our agents have been carefully vetted and often offer competitive, lower than average commission rates to UpNest customers. There is no obligation to sign up with one of our Realtors, but when you can potentially save thousands on commission – why wouldn’t you? If you’re ready to get started, just enter your zipcode below!
Agents Compete, You Win.
Work With a Realtor For the Most Accurate Pricing
Experienced real estate agents are professionals who spend their time understanding the local market in your area and valuing homes based on comparable recent sales. If you want to know the true value of your home based on today’s market, it pays to work with someone who truly knows.
One of the best choices you can make is to work with a Clever Partner Agent to help you sell or buy a home. As a home seller, you’ll save thousands in commissions by paying a flat fee of $3,000 or 1% of the home’s value if the property sells for more than $350,000.
As a home buyer, having a buyer’s agent on your side is an important way to get the home you want at a price that makes sense.
Let Clever help you find the right realtor for your next home sale or purchase. Reach out today!
Zillow vs. Redfin comparison
|Home value sites||Zillow||Redfin|
|Median error rate for home values||5%||1.77%*|
|Relationship with real estate agents||partners||employs|
|Number of homes being analyzed across U.S.||100 million||65 million|
*For homes not for sale, Redfin’s median error rate is 6.55%. Redfin says the reason for this is because there is more data available on homes that are for sale.
As you can see, there are some differences between the two companies. Namely, while Zillow partners with local brokerages and agents in select markets, Redfin has real estate “lead agents” that work directly under the brand.
How Appraisers Assess Value
Before the lender will sign off on your home loan, they will insist on a home appraisal. Typically, this costs several hundred dollars and is paid for by the buyer.
Home appraisers must be licensed and certified by the state. Their job is to conduct an unbiased assessment of the home's value. To do this, they'll conduct a walk-through, comparing the house's features against a checklist. They'll look for visible defects, but they won't look for potential issues in the same way as a home inspector would.
Appraisers usually issue a written appraisal report, including photos of the property, a street map, information about comparable properties, and market data.
Zillow is undoubtedly one of the largest and most-visited real estate websites in the nation. In just the 4th quarter of 2020, Zillow had over 2.2 billion site visitors. This can be both an advantage (lots of eyes on your listing) and a disadvantage (lots of competition).
Unlike Redfin, Zillow allows For Sale By Owner (FSBO) listings. This makes them popular among sellers who don’t want to work with an agent. It also means that their website has listings that might not be found on other websites, such as MLSs that only allow Realtors to enter data.
Zillow also offers iBuying services in limited markets through Zillow Offers. You’ll get an instant cash offer and move quickly to a closing date.
Cost of Using One of the Best Home Value Estimator Sites
One of the best things about home value estimator sites is that most don’t charge a fee to determine a home’s value. The user only needs to go to the site, plug in their address, and continue to the results. Homeowners can make preliminary decisions without paying a professional, such as an appraiser, hundreds of dollars for a home valuation—at least not initially. For instance, if a home value estimator reveals that a home’s value is substantially lower than the homeowner thought, the user may conclude that now isn’t a good time to sell or refinance—and they didn’t have to invest any money to come to this conclusion.
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 suggests 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 introduct a map search feature, which makes them a pioneer of sorts. Unlike Zillow, Redfin is a true brokerage site that recommends their 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.
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