What is a Better Home Estimate: Zillow vs. Redfin?
When it comes to determining the value of a home, various online valuation models such as Zillow and Redfin have become prevalent. However, how accurate are these estimates, and what sets them apart from other tools like Collateral Analytics, CoreLogic, or even traditional real estate algorithms? This article delves into the intricacies of these home value estimators, focusing on Zillow and Redfin, and highlights the differences, advantages, and challenges of using automated valuation models (AVM).
Introduction to Automated Valuation Models (AVM)
Automated Valuation Models (AVMs) are computer programs that estimate the value of a property based on a set of predetermined data points. These models often analyze comparable sales, property characteristics, and local price trends to provide an estimate. AVMs are widely used by real estate professionals and homeowners to get a rough idea of a property's worth.
Understanding Comparable Sales and Property Characteristics
One of the main sources of data for AVMs is comparable sales, which are typically sourced from Multiple Listing Services (MLS). MLS is a system that real estate agents use to list and track properties. Despite the convenience of using MLS data, the accuracy of these estimates can be affected by the varying interests of real estate agents.
Another crucial factor is property characteristics, which can include the age, size, condition, and location of the property. While most AVMs rely on public records and MLS data, a unique feature of Zillow is that it allows homeowners to update their property data themselves. This feature can provide a competitive edge, but it can also lead to skewing the data in favor of the homeowner.
Comparing Zillow and Redfin
Zillow and Redfin are two popular online real estate platforms that use AVM to estimate a home's value. While the core data they use may be similar, the way they process and weight that data can vary significantly. This difference can lead to variations in the estimated value provided by these platforms.
Zillow is known for allowing homeowners to update their property data, but this can also mean that the data might be biased. On the other hand, Redfin does not allow homeowners to update their data, leading to less personalized but more standardized estimates.
Accuracy and Popularity
In general, AVMs tend to be more accurate in areas with high population density and cookie-cutter homes. For example, AVMs might perform well in areas with many condominiums or gated communities with limited architectural variations. However, unique or recently renovated properties may not perform as well with these standard algorithms.
The accuracy of AVMs can also be influenced by algorithmic changes and improvements made by the platforms. This means that the best AVM for a particular home could change over time. As a result, it's often recommended to use multiple AVMs to get a more accurate estimate.
Real Estate Professional's Opinion
Even real estate professionals can struggle to accurately value a home. For a more precise estimate, many homeowners opt to pay for an appraisal by a licensed appraiser. However, it's also advisable to get a second or third opinion from multiple real estate agents. Some agents might undervalue a property for a quick sale, while others may overvalue it to ensure the listing contract is signed.
It's important to be cautious of real estate agents who claim to have sold a property in a day, as they may be more likely to recommend a below-market listing price.
Conclusion
While online valuation models like Zillow and Redfin can provide a useful starting point for understanding a home's value, they should not be taken as the final word on a property's worth. The best approach is to use multiple models and, if possible, consult with a licensed appraiser and multiple real estate agents for a comprehensive valuation.