Can the Redfin Estimate be Trusted? What Home Sellers Need to Know

Posted on Aug 16, 2021


What is the Redfin Estimate?

The Redfin estimate is a home valuation tool provided by real estate brokerage Redfin - it can also be referred to as an AVM (automated valuation model). The estimate is calculated using data from MLSs (multiple listing services) to predict how much a home will be worth when it goes to market - the most important factor being how much other, similar homes in the area have sold for. 

The intent is to give homeowners another tool for deciding when to sell, and provide home buyers with comparative data. Importantly, the Redfin Estimate is not an appraisal - it can be off by thousands of dollars, especially if the listing is missing information about recent renovations, unique characteristics, etc.

There are a few terms that are important to understand:

  • Estimated home value: an approximate amount your home would sell for, based on what other, similar properties have recently sold for. This is what the Redfin Estimate does.
  • True market value: what people are actually willing to pay for a home.
  • List price/asking price: this amount is set by the homeowner, on the advice of their agent. It may or may not reflect the true market value.

Are Redfin Estimates accurate?

According to Redfin, their estimate has “a median error rate of 3.02% for on-market homes and 8.69% for off market homes.” In other words - if you’re a potential seller who hasn’t put your home on the market yet, the estimate may be off by many thousands of dollars. On-market homes tend to be more accurate because Realtors have proactively added in all the relevant info about the home, allowing Redfin to better guess the value.

To understand how this would look for the median home sale price in the US:

  • Current median price: $386,888
  • Range of Redfin’s off-market estimate: $353,267-$420,509
  • Range of Redfin’s on-market estimate: $375,204-$398,572

If it seems like a large range, it is. If your home would sell for the national median price, your off-market estimate could be off by $35,000 - or even more, since that’s simply the median error rate. This means that sometimes homes will be off by only 3% - but conversely, sometimes homes will be off by 11%.

For this reason, the Redfin estimate can be equal parts helpful and harmful. It can be helpful to get a rough estimate of a home’s value, whether you’re a buyer or a seller. But on the other hand, an inaccurate estimate can be misleading and contribute to a less positive home purchase/home selling experience.  

The Redfin Estimate launched in 2015. Since then, Redfin has adjusted its median error rate several times - the original error rates they listed were actually lower for both on and off-market properties than they are now.

Redfin Estimate vs. Zillow Zestimate

The Redfin Estimate and Zillow Zestimate are two competing home value estimation tools. Since they will sometimes give two different numbers for the same property, not surprisingly, users are curious as to which tool is more accurate. 

Is the Redfin estimate or Zillow Zestimate more accurate? As we’ve covered in Can the Zillow Zestimate be Trusted?, Zillow has a median error rate of 1.9% for on-market homes and 7.5% for off-market homes. So according to these self-reported numbers, Zillow’s Zestimate tool tends to be more accurate for both, when compared to Redfin’s (3.02% for on-market and 8.69% for off market).

So many factors impact the estimates, though, that sometimes Redfin will be more accurate, and sometimes Zillow will be more accurate.

One way Redfin pulls ahead is with transparency. Zillow offers very little information apart from the Zestimate number itself. Redfin, however, automatically pulls up the properties it’s comparing your property to, as well as a map of where they’re located. This makes it a lot easier to understand whether Redfin is accurately accounting for the features and updates (or lack thereof) your home has.

Off-Market Comparison

Here's an example of how different the estimates can appear for the same off-market house located in Philadelphia's popular Bella Vista neighborhood.

  • Zestimate: $295,300
  • Redfin estimate: $353,794

As you can see, there is a range of over $50,000.

Using Redfin to look at recently sold properties, for roughly comparable homes (under 1,000 square feet, 2 bedrooms), the very lowest a home in this neighborhood sold for in the last 3 months for was $296,000 - with an average selling price of $354,300. However, these homes still averaged 915 sq. ft ($387/foot) - whereas this is a 756 sq. foot home. 

While at first, it seems like the Redfin estimate is more accurate based on what’s sold recently - if we take square footage into account and assume each square foot is worth roughly $387, then based on this information alone, the Zestimate seems closer to what the actual sale price would be.

 The actual selling price, though, may differ yet again if the home is either extremely dated or has recent updates when compared to recent homes sold in the area.

On-Market Comparison

Here's an example of a current on-market home located in Philadelphia's hot Northern Liberties neighborhood.

  • Listed Price: $599,000
  • Zillow Zestimate: $598,700
  • Redfin Estimate: $587,527

In this example, both estimates are a lot closer to the listed price, likely because the sites had more property information to work with. However, there is still a difference of over $10,000 between the two estimates.

Reasons the Redfin Estimate Can be Off

There are plenty of reasons an estimate can be off. Here are a few factors to keep in mind.

  • Redfin often has trouble pricing condo units. High-rise condos can be difficult to price without additional info since the Estimate algorithm doesn't know if the unit faces the water or faces a parking lot, etc - and this will greatly impact the price.
  • Historical areas. Cities like Philadelphia and Washington, DC are often harder to price than cities like Orlando or Las Vegas because the housing stock is so much older. Older home features and conditions are less predictable than with new homes (among other reasons).
  • Updates and renovations. Renovations can have a big impact on the selling price of your home - according to Remodeling’s 2021 Cost v. Value Report, a mid-range kitchen update increases resale value by nearly $45,000 on average. Renovations are rarely reflected in off-market listings, though, especially because savvy homeowners may want to keep the tax assessor’s office in the dark for as long as possible. 
  • Inaccurate home facts. Redfin may not have access to important information about things like HOA dues, the year the home was built, whether the home has a fenced yard, basement square footage, etc. but these are all things that impact home prices.
  • The neighborhood. In densely populated urban areas, some streets can be considered more valuable than others - even if it's just the next block over. The Redfin estimate will pull comps within a certain radius without regard to specific street values.

What a Realtor has to Say:

"The Redfin home estimate is not a substitute for an in-person evaluation by an experienced Realtor. The Redfin Estimate is only based on public records information as well as current and former MLS listing data," explains experienced listing agent Brandon Mitchell. "It does not factor in the present-day condition of the home or specific market trends and conditions in the local community which could lower or increase the value of the property substantially from the Redfin estimate."

Can You Dispute the Redfin Estimate?

Many homeowners worry that a too-low Redfin estimate can negatively impact them when they go to sell their home. A consumer who believes that a home is worth $400,000 is going to feel like they’re overpaying at $450,000 - even if that’s the true market value.

Unfortunately, it’s difficult to dispute the Estimate for Redfin homes for sale - a similar lawsuit was brought by homeowners against the Zillow Zestimate, and the court sided with Zillow. In other words, Redfin is not doing anything illegal by posting an estimate of your home - so long as they clearly indicate it is not an “appraisal.”

What you can do as a homeowner is update the listing information yourself so that Redfin has more accurate data to work from. Note: this is only allowed for non-active and sold homes. If your home is currently for sale, you’ll need to contact your listing agent to have the MLS information updated.

 Redfin allows you to update your listing with:

  • Any renovation projects you’ve done (you can specify the total cost, project type, and more)
  • Property info (parking spaces, year built, square footage, etc)
  • Property features (basement, waterfront, accessible, etc)
  • The location (if it was incorrect)

For Further Reading

For Sale

Get the Knowledge You Need to Win


Subscribe to our newsletter to get essential real estate insights.

Interests
Regions

Recent Articles

Divorce and Mortgage: What Happens to the House?

Divorce and Mortgage: What Happens to the House?

Posted on Sep 16, 2021

According to Statista, about 80% of married couples own a home together. Divorce, for this reason, often involves couples figuring out how to split a property they used to share. Here’s what you need to know about how homes, divorce, and mortgages impact each other.

Fall 2021 Housing Market Outlook

Fall 2021 Housing Market Outlook

Posted on Sep 10, 2021

In our last market outlook, we were lamenting the severe lack of homes to purchase relative to demand, and were hoping to see some inventory increase to provide relief to the extreme seller’s market conditions.