Breaking News! Zillow estimates are worthless

[HenryPP]

Well, I’m going to try to reach someone at Zillow, see if they can explain it.

I can already guess they’ll say it’s their black box algorithm and yada yada yada.

This might get interesting next year, since I might be selling at that time.

[jeff303]

This is probably gonna make me sound like a Zillow shill, but here goes… Do people realize that algorithms such as the Zestimate operate in aggregate over a large swath of data (properties)? Their goal is to get as close to possible, on average. There are going to be outliers in every such algorithm (in fact, it’s statistically expected), and those individual data points being off don’t necessarily invalidate it. The real performance metric is how well it predicts sale prices overall, for a large number of properties in a large number of metro areas. Take issue with it on that basis, if you like (I personally don’t know of any data like this, but perhaps others do).

[HenryPP]

Jeff, my thinking used to be exactly like yours. Until I saw that property value line going straight down, month after month, while every other property in the neighborhood went up, month after month. That’s a pretty weird algorithm.

At first I thought maybe a foreclosure sale had dropped values in the area. But nope, only value that dropped was mine. (One second while I put on my tin-foil hat).

I emailed Zillow and got the boilerplate response: We use an algorithm which takes into account many factors…yada yada yada.

Looked around at their website, and found that a ton of people are complaining about Zestimates not making any sense. One guy had two identical lots – one with a house on it, the other empty, and the empty one was the one with the higher Zestimate. Go figure.

I don’t want to beat this horse to death. Thanks everyone for your thoughts.

[joeypants05]

Do many people actually put a whole lot of stock in what the zestimate says? I’m looking at buying a house and I certainly don’t pay much attention to what the estimates on zillow and/or other sites says a property is worth because to me they don’t mean much as the estimate doesn’t represent what a seller is willing to sell for or what a buyer is willing to pay. I simply look at the asking price of a house and what other comparable houses have sold at because those are actual numbers. Do the zestimate and other estimates just fulfill the curiosity of what your house is worth today (much like checking the price of stock that you have no intent of selling) or is there more to it then that?

[HenryPP]

Joey, I can’t answer for other people, but for me it actually has some importance.

I bought this house about 1 1/2 years ago in a short sale. That big drop in the Zestimate, especially how large it is, and the fact that none of the neighboring properties shows a similar drop, made me wonder. I’d heard and read about various short sale horror stories. I wondered if perhaps there had been something wrong with the short sale process and I would suddenly hear from some bank saying “Surprise! We have a lien on this house.” Probably far-fetched. But is it possible? I also thought of various other unlikely scenarios.

So it’s not that I actually believe the Zestimate. I was just wondering if it was picking up on some problem or issue. Sort of an early warning canary in the coal mine.

This is somewhat relevant since there is a possibility that I might sell in 2015 and I would rather know ahead of time if there are any potential issues.

After reading the numerous complaints on Zillow’s website by people disparaging the Zestimate, I’m leaning towards the view that the Zestime is not actually picking up any hidden issues. Rather, their algorithm is the one with issues.

[Jazzman]

[quote=joeypants05]Do many people actually put a whole lot of stock in what the zestimate says? I’m looking at buying a house and I certainly don’t pay much attention to what the estimates on zillow and/or other sites says a property is worth because to me they don’t mean much as the estimate doesn’t represent what a seller is willing to sell for or what a buyer is willing to pay. I simply look at the asking price of a house and what other comparable houses have sold at because those are actual numbers. Do the zestimate and other estimates just fulfill the curiosity of what your house is worth today (much like checking the price of stock that you have no intent of selling) or is there more to it then that?[/quote]
If you tell home owners their homes have gone up in value, they’ll believe you. If you tell them they’ve gone down in value, they won’t. Do Zestimates do more damage than good? I don’t think so, since comps and appraisers bring more credible evidence of values when the time comes to sell. If you want to know what your home is worth, look at comps in your area and don’t forget to deduct selling costs.

[scaredyclassic]

[quote=paramount]I only wish zillow was not accurate.

Values in Temecula are going down, down, down

Of course this is not the time of the year that those crook tax assessors appraise your house, they wait until house prices are at seasonal high’s. Thanks California Public Employee Unions.[/quote]

are values going down, or prices?

i only pick up the little real estate booklets when i pass by supermarkets, and the prices are shocking. I also picked upa flyer for a house for sale next toa yard sale and it was almost 500k for a smallish tract like home with some upgrades, but still, it was pretty regular seeming. if they get anywhere in the ballpark of that asking price, seem s like it’s ridiculous.

still, our values probably are going down the toilet.

[Hatfield]

I think Zillow estimates are most useful for tract houses where you’re comparing apples to apples. (“Oh it’s a Windsor Deluxe with the 4th bedroom option, let me look that up.”) It’s of little use in beach areas where all the homes are custom, some have views, some don’t, some have been extensively remodeled, etc. As tools go, it’s a pretty blunt instrument.

[NotCranky]

It’s just bait to attract people to their site…quality is bad but that’s not the point.

[earlyretirement]

[quote=HenryPP]The other homes in the neighborhood are very similar. Same square footage for the houses, with minor variation in land area. All were built at the same time, all look very similar. Basically a neighborhood of cookie-cutter mid-sized family homes.

As for prices cooling, why would only my house be cooling, according to Zillow? Zillow doesn’t have the prices on any of the others dropping. And a 30% drop in a few months is not “cooling” – it’s a crash.

And Trulia shows all the houses, including mine, rising.

Maybe it’s as livinincali says. Maybe Zillow just doesn’t like me. 😀

I’m treating it all as a bit of a joke. Except I have this nagging feeling that someone is manipulating the price for this particular home, and I don’t know why.[/quote]

HenryPP,

I wouldn’t worry about it. You might just want to click on the “Edit” button and there is a section called “Report Problem with Listing”. My house was actually listed twice on Zillow. And the values were $200,000 difference on the SAME house. I reported it and Zillow didn’t do anything for over 18 months but finally they did delete the 2nd one that I reported as there were two listings.

So, you might want to report it and see if it does any good. I agree with the others that it really is a moot point what Zillow gives as a Zestimate. It’s all kind of gimmicky that actually drives traffic to their site from people checking their zestimates all the time.

But if it makes you feel better you can actually put a note in the “Owner Estimate” section. I actually have friends that do that. Some put in notes stating how it’s off or why they believe it’s off.

I wouldn’t worry about some conspiracy theory. It’s just that there can be many factors for mistakes including human error entering it, etc.

I actually met Stan Humphries from Zillow the co-creator of the Zestimate earlier this year at a real estate conference. I chatted with him for about 45 minutes. He’s a really nice guy. It was funny as there were probably over 100 people in the audience in a seminar he was giving and they were all bitching about the Zestimates. Zillow really doesn’t care if they are off or on.

Actually in my area they aren’t far off but I know other areas that are wildly off. I don’t think it matters either way more than owner ego. I’d focus on comps of other similar properties in the area.

[Author]

Posts