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
Susie - glad to see this posted for agents and for consumers. I find lots of folks do use these both in considering the value of their home as well as in making offers. It can work reasonably well in some cases and be a disaster in others.
It's amazing how far things have come - I remember when Zillow first hit the Internet. My, what an uproar.
It's critical to keep in mind that Zestimates are only 1 data point in the process, just as are comps that have sold, among other factors. They are not, and likely never will, be gospel.
I watched a video by some guy at Zestimates a few weeks ago. In his own video, the guy made it sound like Zestimates were useless. LOL. I was dumbfounded at the way he presented the product.
Zillow and any similar websites should be banned. Giving someone an inaccurate "starting point" is misleading. They must have a bunch of attorneys around, waiting for every challenge. Corruption at it's best!
Toula, I have a very easy time understanding why the public doesn't know who to rely on.
Jeff, this is always a controversial issue, but I don't know anyone who has an easy time of coming up with comps in many areas of the country right now. Thanks for your perspective!
Lisa, that was David of Zillow and believe me, he knows of what he speaks.
Gregg, my goodness! I am curious to know how you do comps (if there aren't any recent sales).
Long time no talk. I agree I tell clients that I use them for price trends but not for accurate numbers. Even if the numbers are off, the trends in pricing in the neighborhood will usually be accurate. I look at how that home sits in the neighborhood.
Hi Susie, I find comparables sales the same way anyone else would, I'd expand my search parameters until I find them. Using an automated system with a secret formula for its value conclusions, is a wacky way to get a value.
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Susie...thank you for the post. Very good information.