Subscribe to Cary W Porter blog

Hard lessons from the Zillow fiasco: Why Zillow and Redfin pricing is wrong, and how homebuyers and sellers can avoid the same mistake when pricing a property in 2023

Key Takeaways

  • The Redfin Estimate and the Zillow Zestimate calculate a home’s market value by using publicly available information and user-submitted data.
  • Both tools are often used by buyers when shopping for a home.
  • Redfin’s median error rate is 2.28% for on-market homes, while Zillow’s is 1.9%, according to the two companies as of this writing.
  • Neither home value estimator can or should replace a professional appraisal.

If you’ve ever wondered what you could get for your home, you probably pulled up the real estate listing site Zillow to check its Zestimate or possibly looked at Redfin and the estimate offer there.

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Errors do happen, so your value also may be low because of outdated or incorrect information about its previous sales prices or tax history. 

These algorithm-fueled pricing tools estimate values for millions of homes across the country and are popular resources for homebuyers and sellers alike.

However, determining a home’s value is a delicate process — not something easily accomplished at the push of a button.

Problems with Zillow’s “Zestimates” forced it to shut down its home-buying business and lay off a quarter of its staff. Zillow (ZG) stock plunged 80% from its peak value.

Here's why it was so hard for Zillow and Redfin to accurately predict home prices and what you can learn for when you buy, sell or refinance.

Factors That Affect Your Online Home Value

While Zillow and Redfin don’t publicly share the specifics of how their algorithms evaluate and weight information, these are some of the factors that can come into play: 

  • Home Characteristics. Your home’s location, square footage, number of bedrooms, and any special features—such as a pool—will affect its value. 
  • Length on Market. How long your home has been listed on the market and gone unsold can have a significant impact on its listed value.
  • Off-Market Data. If your home isn’t currently on the market, Zillow and Redfin will use tax assessments, previous sales prices, and other publicly available data to estimate its value. 
  • Market Trends. Redfin and Zillow home value estimates can fluctuate based on market trends. For example, seasonality can affect home prices; houses tend to sell for more in the summer and less in the winter.3

What went wrong at Zillow?

In 2019, Seattle-based Zillow launched its iBuyer business, called Zillow Offers, to purchase homes directly from owners, make repairs and put them back on the market.

Zillow was so confident in its pricing algorithm that it said its Zestimates would serve as the initial offer price on eligible homes. That didn’t last.

The company announced in 2021 that it was exiting the iBuying business. In a quarterly earnings call, CEO Rich Barton said Zillow was unable to correctly forecast future home prices amid volatility in the pandemic-driven housing frenzy.

Indeed, an unexpected desire for new housing by work-from-home Americans, combined with ultralow mortgage rates, drove U.S. housing prices to new highs.

Rick Sharga, founder and CEO of CJ Patrick Company and former executive with RealtyTrac, said Zillow’s business model was flawed, noting on his company’s site that house-flipping investors often pay too much and underestimate the time and cost to ready a home to sell.

“Zillow Offers appears to have made both mistakes and done so at a large enough scale to result in hundreds of millions of dollars of losses,” Sharga wrote.

Zillow appears to have learned a few things since moving on from iBuying and analysts are optimistic about the company's stock price and overall direction in 2023.

The best ways to determine a home’s value.

One lesson stands out from the Zillow fiasco: Property values can change fast. Do your homework on fair market value.

Find a qualified real estate agent.

Your real estate agent must know your neighborhood. Good real estate brokers analyze recent similar property sales to recommend a list price.

At The Cascade Team Cary Porter teaches brokers to use an 18 point assessment to determine home value. Our 18-point analysis will bring you the most accurate assessment possible when it comes to your home’s value. We factor in ( Sold Homes, Active, Pending, Pending Inspection, Builder, Size, Beds, Baths, Upgrades, Year Built, Schools, Lot Size, Assessments, Conditions, View, Curb Appeal, Title Issues, and Easements).

Market Snapshot | Home Value Report | Sammamish Home Values (

“I don’t know any seasoned agents who depend on the Zestimate for a pricing recommendation,” Cary Porter, owner of The Cascade Team Real Estate says. “But because the marketplace is so familiar with Zestimates, it often would be discussed relative to what buyers’ expectations of a property might be.”


Lenders require an appraisal when you take out a mortgage — and sometimes for a refinance — to ensure the house or condo is worth the amount you want to borrow from them.

An appraiser examines the home and studies market trends, along with other factors such as location and whether the house is in a flood zone.

In a rapidly appreciating market, it’s not unusual for an appraisal to come in below the price a buyer is willing to pay. In those cases, some appraisers are willing to accept additional information about the local market and revise their valuation. But if they’re not, the buyer and seller may have to renegotiate the price.

Look beyond computer-based valuations.

It’s tempting to accept the prices spit out by private real estate websites — Zillow and Redfin are just two of many — but remember that those figures are simply estimates. Zillow even says buyers and sellers should supplement Zestimates with their own research.

With your broker or on your own, compare a home with similar properties. Be sure to consider less obvious factors such as school zones. Two similar houses in the same area can have wildly different values if only one is zoned to a top-rated public school.

The Cascade Team is a real estate brokerage whose focus is centered on customer service.  Our customers are our number one priority, and our local agents works hard to not only find properties that meet your needs and wants, but also leverages their local market knowledge to help guide you through the home search process.  Our commitment to excellence in service is unparalleled in the areas in which we serve.  While we offer a number of online tools to assist you with your home search, having a knowledgeable local agent to guide you is so important, especially in a changing market.  From contingencies to protect you, financing clauses, negotiations, etc., we are committed to helping you secure your new home, and that's where our service and local knowledge sets us apart.

Below is a standard “Road Map” that explains the typical process for buyers to close on a new home. Of course, there can be many variables along the way, but this gives a good run-down of what to expect from a typical transaction.

  1. Meet with a real estate professional: Discuss the type of home you're looking for, including style, price, and location.
  2. The Buyer's Advantage: As the home buyer, your agent's commission is paid by the seller of the home in almost all circumstances. This means your representation costs you nothing!
  3. Get Pre-Approved: You will need pay stubs, W2s, and bank statements. Knowing what you can afford is critical to a successful home shopping experience
  4. Search for Homes: The fun part! Your agent will schedule showings and help you find the perfect home.
  5. Advanced Search: Not all real estate websites are the same. Your real estate professional has tools and systems to ensure you see every available home that meets your criteria.
  6. Make an Offer: Your agent will prepare your offer based on the price and terms you choose.
  7. Negotiation and Contract: It may take a few tries to get it just right, but hang in there. You're on your way!
  8. The Contract: In most cases the contract provides you with a timeline to obtain financing as well as time to inspect the physical condition of the home. Your real estate professional will inform you of all your rights and responsibilities related to the contract.
  9. Under Contract or In Escrow: You and the seller have agreed to the price and terms. The home is effectively held for you until closing.
  10. Final Details: Perform due diligence, order the appraisal, conduct an inspection, and review terms with the lender.
  11. Preparing for Closing: You will be finalizing your loan, reviewing documents, and discussing the findings from the inspection. Your agent will manage this entire process for you.
  12. Closing: This is the transfer of funds and ownership. An escrow, title company or an attorney typically acts as an independent third party to facilitate the closing.

The Home Buying Process

As you begin to think about buying a home, you're probably acutely aware that this is likely to be your greatest investment ever (short of children or a good marriage), and you might be wondering if there's anything you really need to know as you go into this process. This is where your real estate professionals come in. With the help of a trained agent, you can come out on top of a closing that might otherwise have pushed your retirement ahead a decade!

Posted by Cary W Porter on


Email Send a link to post via Email

Leave A Comment

Please note that your email address is kept private upon posting.