When should you trust “Zestimate’s”?

Zillow calculates its Zestimates using a mix of public data, including tax assessments, recorded mortgage liens, and other variables. Sounds good in theory, but here’s the problem:

1. Texas is a non-disclosure state. This means Zillow has no idea what homes are actually selling for.
   In Texas, being a non-disclosure state means that sales prices of real estate transactions are not made public record. Unlike disclosure states where property sale prices are recorded and publicly available through local government offices, Texas does not require this information to be disclosed. This has significant implications for property data platforms like Zillow. 

   What Zillow Knows and What It Doesn’t

   Zillow and similar online real estate platforms rely heavily on public records to provide property value estimates (like Zillow's Zestimate). In non-disclosure states like Texas, because sales prices are not public information, these platforms often have incomplete or inaccurate data. They might rely on user-submitted data, tax appraisals, or general market trends, but these sources are not as reliable as the actual sales prices.

2. We actively fight to keep property tax values low, don’t we? So, relying on those numbers for accurate estimates? Questionable at best.
   
   In Texas, many property owners actively protest their property tax valuations each year to keep their taxable property values as low as possible. This process often involves challenging county appraisal districts' assessments, which may be inflated or not reflective of the current market. Because these values are primarily used for taxation purposes—not for determining true market value—they often do not align with what a property would sell for in a competitive market. 

   The Importance of Accurate Valuation

   This discrepancy is another reason Texas homeowners and buyers need to consult real estate professionals. Licensed agents and appraisers can access accurate market data through the MLS and other proprietary sources. They take into account comparable sales, market trends, and unique property features—none of which are captured by tax values alone.

3. Recorded mortgages only reflect the lien amount—not the down payment, which can vary widely from 0% to 20% or more.

   Recorded mortgages in Texas, like in most states, reflect only the lien amount—the amount of the loan the buyer has taken out—not the full purchase price of the property. This is another factor that complicates efforts to determine accurate property values using publicly available data.

   Why This Matters for Property Value Estimates

   1. Incomplete Financial Picture: The lien amount excludes the down payment, which can vary significantly based on the buyer's financial situation, loan type, and preferences. For instance:

      • Some buyers may use VA loans with 0% down payments.
      • Others might put down 20% or more to avoid private mortgage insurance (PMI).
      • Cash buyers wouldn’t have any recorded lien at all!

      Without the full purchase price, relying on mortgage data gives an incomplete and often misleading picture.

   2. Variability of Loan Terms: Different financing structures (e.g., FHA loans, conventional loans, jumbo loans) also add layers of complexity. Recorded liens don’t reveal these details, nor do they indicate if the property was sold at, above, or below market value.

   How Zillow and Similar Platforms Are Affected

   Since Zillow often uses public mortgage data to help estimate property values, the lack of insight into down payments or cash transactions means their calculations are frequently off-base in non-disclosure states like Texas. This is especially true for higher-end markets, where larger down payments or all-cash purchases are more common.

    

4. Zillow doesn’t account for your home’s condition or the condition of the homes it uses for comparison. In short, Zestimates are more guesswork than precision. 
   

   Why Condition Matters

   1. Every Home Is Unique: Two homes of similar size and in the same neighborhood can have vastly different market values depending on their condition. A home that has been recently renovated with high-end finishes will command a higher price than one needing extensive repairs.

   2. Invisible Upgrades: Zillow doesn’t know if a homeowner has added valuable upgrades like energy-efficient windows, a new roof, or a custom kitchen. Conversely, it also doesn’t know if a home has underlying issues like foundation problems or outdated plumbing.

   3. Misleading Comparables: Zestimates rely on nearby homes as comparables without knowing their true condition. For example:

      • A fixer-upper that sold below market value might skew a Zestimate downward.
      • A fully remodeled home that sold at a premium might inflate the perceived value of surrounding properties.

   The Limitation of Algorithms

   Zillow’s algorithm primarily uses public data, including square footage, lot size, number of bedrooms and bathrooms, and general location. It doesn’t consider qualitative aspects like:

   • The quality of construction or finishes.
   • Curb appeal.
   • Landscaping.
   • Neighborhood nuances, like proximity to a park or a busy road.

   Real-World Impact

   This lack of nuance can lead to frustration for homeowners and buyers:

   • For Sellers: A low Zestimate might discourage them from listing their property at its true market value.
   • For Buyers: An inflated Zestimate could lead to unrealistic expectations or overpaying for a property.

   Professional Valuation: The Gold Standard

   Unlike Zillow, real estate professionals and appraisers physically evaluate a home’s condition and account for these details in their pricing strategies. They also analyze true comparable sales from the MLS, providing a far more accurate picture of the property’s value.

   Bottom Line

   Zestimates are convenient, but they are no substitute for a professional valuation. When it comes to understanding your property’s worth, especially in Texas, think of Zestimates as a guess—not gospel. The true value lies in the details, and those require a trained eye.

    

Trust them about as much as you’d trust a rattlesnake! 

If you’re looking for an accurate understanding of your property’s value—one that considers its unique condition, market trends, and true comparables—don’t leave it to guesswork. Call us for a free valuation and property audit. We’ll provide you with expert insights, a personalized analysis, and the guidance you need to make confident real estate decisions. Your property deserves more than an algorithm—reach out today and let us show you the difference! 

-Chelsea & Bailey