This morning, I received an email from the head of marketing at a very large real estate company who is a listing partner of Zillow's. He asked me if I had a canned response to agents asking about Zestimate accuracy. Here's the email that I sent him:
Hi XX,
We have two videos on this topic which we send to a lot of people.
But here are the main points so you also have them in text.
Zestimates are calculated three times per week by computer models that try to approximate what the market value is for almost every home in the country. We crunch numbers on 70 million homes and publish those Zestimates to the website every few days.
We're very transparent about our Zestimate accuracy and we report on it quarterly on the site here. We encourage agents to show the accuracy table (which can be found by clicking on “Zestimate Values & Accuracy” on the bottom of every page of the website). The accuracy table helps agents explain to clients the limitations of the Zestimate, and helps reinforce the importance that a real estate agent has in helping the client think through the value of their home.
Zestimate accuracy varies depending upon the quality of the information we have on the specific home. Also, Zestimates are more accurate on homes that are more similar to other homes that have recently sold; on the other hand, Zestimates are less accurate on more unique homes.
Keep in mind that when a home is listed for sale on Zillow, several things happen with respect to the Zestimate:
1. The Zestimate comes off the map page and is replaced with the For Sale price
2. The property attributes (e.g., # beds, # baths, sqft, etc) which were previously provided by the county are replaced by the listing information
3. Zillow recalculates the Zestimate within a few days based on the new property attributes. The For Sale price of the home is not a direct input into the Zestimate though.
4. On the listing page (aka “the home details page”), the Zestimate is removed from the top of the page and replaced with the For Sale price. The Zestimate still appears on the page, but at the very bottom. In some cases, the Zestimate doesn’t appear on the listing page due to an inability to match the address from the listings feed with an existing address in our database.
We tirelessly explain to consumers and agents that Zestimates are just a starting point and they're not the end-all-be-all in figuring out the value of a home. They're just another datapoint which needs to be considered and discussed between real estate agent and client. Best regards, Spencer
37 Comments
on Zestimates: they're just a starting point
OCT
01
2009
Spencer - While some discount the value of the "Zestimate, you accurately describe that they're a starting point--and for those just entering the buying/selling fray, they're a very helpful point of beginning. Of course it's impossible to pick a specific home and provide a precise value without knowing all the variables of which Zillow cannot be aware. But there is great value to consumers in helping them grasp the big picture; and then they can proceed to the specifics.
Hi Spencer. I just had this conversation with my Dad - who was confused by the Zestimate and a recent appraisal. I think Zillow provides a great starting point service and as an agent I appreciate the statement by Zillow that suggests contacting a Realtor for a truer market evaluation.
"We're very transparent about our Zestimate accuracy and we report on it quarterly on the site here."
The page you mention suggests 'Last Update: May 20, 2009' and '...computed for the three-month period ending September 30, 2008' just below the table. Neither seems to line up with 'we report on it quarterly'.
Hi Spencer - The same could be said in our market about the listing prices. We have so much distressed inventory (and a lot of buyer/investor competition) that it's tough to really zero in on what a home will actually sell for. Nice to see that you update the info once a home is listed for sale.
Excellent catch! I hadn't noticed that. I'll remind the analytics guys to update it. They're supposed to update it quarterly... Thanks for the heads-up.
It is a starting point. Whenever I want to get the ballpark of a property price I do a search on Zillow and it usually gets me in the ballpark and with the industry local knowledge and the recent sales prices through Zillow you can usually get pretty darn close to an accurate price. Although this is easy for me to say since Zillow is right in our backyard in Seattle and it's where they started.
Spencer - thanks for the article, which I reblogged. It brings awareness to the consumer who are sometimes really taken Zestimates at heart and ignore the Realtor's comparable market analysis.
Spencer--I have always considered Zillow a starting point for sellers who may want to move sometime in the future. Most realize their will be unique qualities to their property that will change the value...As it is just averages based on what is reported, most people realize that their home will really only be worth what someone wants to pay for it AND what it can appraise for at the time of a sale. But it is a great starting point for those unsure of whether they want to make a move or not.
Spencer, great info and lends credibility to what I tell clients! An agent who doesn't think a potential client isn't checking their Zestimate before we get there is missing an opportunity!
Why do agents support Zillow? I can't tell you the number of times I have a call from someone that want's to buy or sell a home for a price that's not even close to reality. When I ask where they got the price, it's alway "I looked at Zillow".
I'd rather have someone pull a number out of their ass, than look at zillow. When I look at my own house, there is a price "range" of about 250K. WOW, that's helpfull.
How old is your regurgitation of data? There is a sale in my own neighborhood that took place on 7/16/09 that is nowhere to be found on Zillow. It was a Realtor-represented sale and the data is in our MLS, and it is in our County websites. This is the kind of thing I just have a really big problem with. This comp completely changes the landscape of comps in our neighborhood for a cluster of homes, but it's nowhere to be found.
Zillow is not even close here in Phoenix. It is frustrating when I run across a seller that has looked at Zillow and thinks their home is worth 30-40% more than it really is.
I find Zillow's estimates of value to be essentially of no value - except, perhaps, for homes in a very large sub-division with repetitive floor-plans. Most subdivisions in my area are relatively small and lack homogeneity. Year-built varies widely even within a quarter-mile radius. Rarely is there enough turnover within one subdivision to allow data in your system that even approaches reliability/applicability - no matter how often you update it.
Zestimates are nearly always an impediment to the work of agents - just something more to overcome in the listing/selling setting.
Almost every home is unique in some way (e.g. the older the subdivision the more condition is an issue).
It is hard to come up with "really good comps" even within an MLS system. Pricing is an art not a science.
I could probably come closer to what agents I know think about this - but both AR and I have standards of expression that I'd rather not breach.
"We tirelessly explain to consumers and agents that Zestimates are just a starting point and they're not the end-all-be-all in figuring out the value of a home."
You wouldn't have to tirelessly explain that it is just a starting point if it were accurate. Sorry, but I think your formula for figuring zestimates is terrible.
Zestimates are the first thing I throw out when calculating value.
Spencer..i have heard my neighbors talk about this ..They love it..they love your site and I like talking to them about it as their neighborhood Real Estate Professional...Thanks
Spencer as an appraiser I agree with most here...Zestimates are really of NO Value. YES I totally agree if you are dealing with a "cookie cutter" development where there are loads of the same homes for sale and have sold, then these estimates are usually pretty accurate, but where we live and appraise, there are more unique homes than there are cookie cutter developments and so these estimates can be WAY off both HIGH or LOW.
Noone should rely on these Zestimates, use your local Realtor or Appraiser to give you a much better clue about the vaue of your home.
Hey all - Spencer took today off, so I am going to try to respond on his behalf.
Teresa (#2) - Of course a professional is necessary for more accurate information, there is no way a computer can estimate what a live professional can customize. Thanks for explaining it to your dad! :)
Jim (#8) - A computer is just an easy, anonymous place to start and that's why people do it en mass, regardless of the industry. What is interesting is how much stock people put into forums and rating/review services. I know I do. I read reviews all the time on amazon and found my dentist because of his reviews on yelp. The Zestimate makes people comfortable thinking about real estate. Then there is huge opportunity for agents to leverage the traffic the Zestimates attract by demonstrating their expertise and building a reputation by answering questions on the site in places like Zillow Advice.
Teri (#10) Well said.
Karen (#12) Sometimes I think the 'misconstued' is really just people trying to use anything they can as leverage. You don't hear about someone offering to pay more for a house because the Zestimate is higher than the list price... Obviously this has been done in real estate for years, but now the technology has just changed to allow people to do this in a different way.
Andrew (#15) One of the reasons Agents support Zillow is because exactly what you said "I can't tell you the number of times I have a call from someone that want's to buy or sell a home" - then they are good at converting those calls from perhaps left field, into clients.
Christianne (#16) We do have a value range on homes with Zestimates. And you're right, the range further solidifies that the Zestimate isn't an exact science. The range is dependant upon our median err rates in the counties. (#17) Every county is different because they all report differently. Some report monthly, some semi-annually. Also, some of our partner listing feeds supplies sold data and some don't. So the time to our site can vary greatly. We do have systems in place to alter the homes that are used as comparibles, here is a video with more information about that.
Rashel (#18) In Maricopa county, our median err rate is 10.1%. Here is the chart.
Lyn (#20) I can assure you Spencer spends hours individually responding to agents who need help and answers, trust me I've seen the responses he sends at midnight. As COO he has a lot on his plate and one of things he makes a priority is to listen and engage with agents in places like Active Rain. He doesn't have a list of canned responses, but there are only so many ways to skin a cat. It's a starting point, use a professional for more accurate info.
Hannah (#23) You're right, the public loves Zillow. So to be able to talk intelligently and with stats as to the accuracy of the data is a huge win over someone who may just blow a Zillow comment off. Thanks for using the site.
I find it sort of frustrating that when listing a housem, the zestimate totally disappears. It would be nice if there was an option for comparison, because I currently have a listing priced way below the zestimate, and it seems like we lose that "advantage" when potential buyers look it up [having it listed at 68k, vs the zestimate of close to 80 ].
It may be because are tax values are rediculously high, but I find the zestimates for my area to be very innacurate, and typically on the high side. That said, if anyone wants to offer me 3/4 of the zestimate on my home, you can have it. Go for the full zestimate, and I'll throw in the furniture, a motorcycle, and possibly my husband. ;)
Here is a big problem I have with Zillow. Our listing agreements have a clause the gives the sellers the option of requiring us NOT to place their home on a site that has an automatic valuation system in it. Since if I place a home on Zillow I have no option of not having a Zestimate displayed, I would be in breach of contract by using Zillow. And I must make sure that none of the other sites I use link to Zillow. Until you put in the option of not having the listing displayed with a Zestimate, I cannot use Zillow and must remove any of my listings that find their ways there. As a Single Agent for my sellers I must obey their wishes and do what is in their best interest. Sorry.
You can say what you want about them being a "starting point", but the consumers are angry when the price on their home and your Zestimate do not match. And our county data is known for being inaccurate or incomplete. I had 1.5 baths according to the county, but have yet to find the half bath.
But in our case, the accuracy is academic, our listing contracts prohibit, in most cases, the placement of our homes on sites such as yours. You should at least give agents some control over THEIR listings and let them opt out of having a computer valuation placed with their homes. Until you do that, as I said, my hands are tied.
Wish you had to walk in our shoes for a few weeks. Things are tough enough now, and it is sad that some are making things even harder for good agents to make just a basic living.
For the life of me I too don't understand why agents support Zillow either. It provides a "service" that adds absolutely NO value, creates confusion for buyers and sellers alike, messes up transactions and steals our google juice. The end goal of Zillow is to monetize to the point where their hands will always be in our pockets. I wouldn't mind so much if they had something of real value to offer...but you don't. All they have is a poorly executed gimmick that the public is gullible enough to like.
I too have difficulties with listers who don't want their listing displayed with a zestimate. That issue creates problems when we want to broadcast the listing as widely as possible on the internet. Further, this is a market where everyone is ANGRY. Buyers are ANGRY that they can't "steal" a house. Sellers are ANGRY that they are losing most of their deposit if the bought recently or are getting far less out for their retirement - money they had been counting on. All the zestimate does is stir the pot and make matters worse.
Btw, just because the public likes or even loves something doesn't make it of any intrinsic value. People love cigarettes and drugs - that doesn't make them good or useful.
Sara, you obviously misunderstood what I said. I don't get calls from people on Zillow, as I don't support the concept or the misinfomation on the site.
Agents, the concept is to give the public another piece of information that they can use to de-value our services. And if agents support it, then they have no one to blame when the public thinks are services aren't worth the commissions we charge.
Suggestion, Spencer and Sara - have the Caveat flash in front of the Zestimate. Seriously, there are people out there who quote Zillow like it was 100% accurate because they don't pay attention to the fine print. I have even had real estate agents (shame on them) quote me the Zestimate as though it were a Market Analysis and it wasn't even close.
Zillow via Spencer on such forums as Forbes.com, etc., is receiving such nationwide recognition that the public perception in many instances as that Zestimates are accurate. This hurts our profession, so I am encouraging you, Spencer, to do what you can to highlight the fact that these can have a rather WIDE range of inaccuracy - front and center - rather than in the fine print at the bottom.
Sara - I appreciate your comment back to me, however, there were more recent sales than the one I was pointing out already being reflected in your system, so it wasn't a timing issue. I bring this up because if there are more recent sales that were already reported, and our county has NO backlog of recordations, then how could the one that was missing be overlooked? I have logged in to Zillow today and I note that it is present, and so it's been corrected. The greater picture is when you're missing comps, it can greatly skew a Zestimate one way or another. While I can appreciate the fact that you're trying to gather data in a countless number of counties and certainly errors are not only possible, but should be expected when dealing with such a large data set, the overwhelming issue is we never know when it's our turn to pull the trigger and get inaccurate data regurgitated back to us.
I think when you provide a Zestimate you should also provide your local "degree of error". That is the part of the balance that's missing, especially in rural areas. Until your degree of error shrinks considerably in places where it's greater than 15%, I think you have a duty to disclose to the general public that you could be off substantially. It shouldn't be something they have to research and dig up on an arcane chart somewhere. Either that or you should switch your algorithm to provide a range, splitting the percentage either way.
I still believe strongly that the AGENT whose listings you use, and the agent did do all the work to enter the data, should have the option of claiming the listing (which they do now) and then also have the option of saying "I choose to have a Zestimate appear with MY listing" or "I choose NOT to have a Zestimate appear with my listing". I hate doing all the work and then have a third party destroy its effectiveness. That is not playing fair and you know it. If I went to each of my competitor's homes they had listed and posted a sign out front saying "here is my estimate of what the price should be", how long do you think it would be before I was called up before our ethics board????? About one day would be my guess.
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Spencer - While some discount the value of the "Zestimate, you accurately describe that they're a starting point--and for those just entering the buying/selling fray, they're a very helpful point of beginning. Of course it's impossible to pick a specific home and provide a precise value without knowing all the variables of which Zillow cannot be aware. But there is great value to consumers in helping them grasp the big picture; and then they can proceed to the specifics.