Kevin Ward compares Zillow's Zestimate to a Comparative Market Analysis. CMAs are more reliable because they use human judgment to adjust for size, age, condition, and other factors, while Zestimates are purely algorithmic and can be wildly inaccurate when public records are wrong.
Chapters
Foreign. Hi there, it's Kevin Ward, the founder of yes Masters Real Estate Success Training, helping you get more yeses and more successes in your business and in your life. And here's the question I want to talk about today. Is a zestimate as accurate as a comparative market analysis? Which is better? Should we use zestimates or should we use a comparative market analysis? And which should consumers depend on or trust? Why would I want a market analysis? I got a, I got a Zestimate. And so the answer is of which is better. I'm going to say first it depends a little bit on the competence of the real estate agent or, or the person doing the CMA comparative market analysis or broker price opinion, a bpo, depending on who's doing it in the process they're using it, or even a flat outright appraisal. Now obviously an appraisal is a much more detailed, complex process done by somebody who is a licensed appraiser. So it theoretically should be more accurate than either an a zestimate or a market analysis. However, in general, a market analysis is going to be consistently more accurate and more dependable than a zestimate. Why? Well, very simply because zestimates are based on a computer algorithm. That's it. It's a computer formula where it literally takes numbers that are public record about properties and it runs them through the sum formula and it calculates all that up and it says here's the zestimate. And, and if you've ever paid any attention to really watch zestimates that much, you've seen some of the most crazy zestimates of properties that are, you know, obviously that zestimate is nowhere close to correct. I mean, where you've seen literally an old beat up mobile home and it says that the zestimate is $7 million and it's, you know, on a, on a postage stamp lot. And it's obviously an error. And it's an error because one of, one or more of the numbers in the computer generated algorithm, one of the numbers from the public record was probably just simply incorrect. So Zestimates do not have any intelligence in the actual processing of the number. The other thing is they're just notoriously inaccurate. They're so notoriously inaccurate that if I understand correctly that the Zestimate leader, the Zillow leadership, said we'll pay a million dollars to any broker or real estate agent that give us a more accurate formula or algorithm for giving estimates, computer generated estimates for home. Well, the reality is a market analysis is always in general going to be more accurate because it has, number one, a human element of intelligence attached to it. So there's several things that happen. One is they're actually using human judgment to find comparables that are actually the most comparable to the subject property. So you've got a subject property and they're going to find three or four of the most recent sales that are actually comparable to that subject property. Meaning same location, same age range, same size range, same quality of finish out. In other words, you're not taking a volume builder low end home and comparing it to a highly upgraded custom home. In other words, you're comparing apples to apples, not apples to a whole basket of fruit. That could be any, anything. You're actually comparing apples to apples. So they're taking and they're looking at comps that are actually most comparable, that are recent and then they're making adjustments on a good market analysis, they're actually making adjustments based on differences in size and square footage and age or condition and so forth. And they're able to adjust for that. Is there a difference because of the view? And when you have a real estate professional that knows what they are doing, a comparative market analysis should always be very, very similar to the same outcome you're going to get with an appraiser. Again, make sure that you have an expert, a true professional who knows what they're doing, who knows the market doing the market analysis. And you can always count on the fact that is going to be better than a zestimate almost every single time. And if you if zestimates ever closer, it's just luck. Oh, one more thing. If you like this video, if it was helpful for you, give it a thumbs up, comment on it if you have any questions. If you're not yet subscribed to my channel, make sure you subscribe to my channel and I'll see you on the next video.
