People that have used the internet to search for Real Estate anytime in the past few years have probably come across the Real Estate website Zillow. In addition to providing information about properties for sale, Zillow has also come up with a tool that automatically estimates the value of a given property, even properties that are not for sale. This estimate is called a Zestimate.

The problem with Zestimates is that they are not always accurate. National Real Estate publications have reported on these inaccuracies lately and I thought it was worth taking a look to see how the Zestimate fairs in the Bozeman market.

Nationwide, Zillow Zestimates have a median error rate of about 8%. That may not look too bad at first glance, but an 8% difference on a home that’s actually worth $400,000 could swing the Zestimate anywhere between $368,000 and $432,000.
To determine Zestimates local accuracy, I analyzed all single family home sales that occurred during the month of March (38 sales) and compared the actual sold price of each home to the Zestimate. The median error rate was on track with the national average at about 7.5%. The average error rate was about 6.5%. The worst error rate was over 17%. Again, on a $400,000 home, that 17% error rate could swing the Zestimate by $68,000, or anywhere from $332,000 to $468,000.  

The vast majority of Zestimates were low, although there was one Zestimate that was 16% high. Less than 25% of the Zestimates were within a 5% or less accuracy rate. To be fair, there were actually 2 out of the 38 sales where the Zestimate was almost exact. While this informal study that I completed was a small sampling of homes within the Bozeman area, the findings are on course with national averages and reveal the inaccuracy of a computer program in determining a home’s value.
There are a lot of great features and information on Zillow’s website. It’s a great place for buyers to search for Real Estate. The Zestimate, while not accurate for pricing information, could be used it to look at trend lines. In the end, buyers and sellers should always verify that they’re basing their decisions on local and accurate information.

As usual, I have included data for the number of homes sold during the first 3 months of 2015. In addition to the 174 homes sold during this time period, another 171 homes are currently pending, or under contract, as of the date of writing this article.

The included data reflects sales of homes on both less than and greater than 1 acre in the greater Bozeman area, including Four Corners, Gallatin Gateway, Bridger Canyon, and Bozeman city limits. The data includes home sales reported through the local Southwest Montana MLS, and does not include private party sales, Condominiums, or Townhouses.