When done correctly, a Comparative Market Analysis (CMA) will consistently be more accurate and more reliable than a Zestimate. Why?
Hi there, it’s Kevin Ward, the founder of YESMasters Real Estate Success Training. Helping you get more “yes’s” 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 zestimate. And so, the answer is, of which is better, I’m gonna say first it depends a little bit on the competence of the real estate agent or the person doing the CMA, comparative market analysis, or a broker price opinion, a BPO, depending on who’s doing it and 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 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 the properties, and it runs them through the sum formula, and it calculates all that up, and it says, “Here’s the zestimate.” And if you’ve ever paid any attention, or really watched 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 all beat up mobile home, and it says that the zestimate is $7 million, and it’s on a postage stamp lot. And it’s obviously an error. And it’s an error because one or more of the numbers in the computer generated algorithm, one of the numbers from the public record, was probably just incorrect. So zestimates do not have any intelligence in the actual processing of the number.
The other it, 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 $1 million to any broker or real estate agent that can give us a more accurate formula or algorithm for giving estimates, computer generated estimates, for a home.” Well the reality is, a market analysis is always, in general, gonna 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 properties. You’ve got a subject property, and they’re gonna 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 anything, but you’re actually comparing apples to apples.
So they’re taking and looking at comps that are 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 gonna 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 gonna be better than a zestimate almost every single time. And, if a zestimate’s 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 ya on the next video.