Category: 
Investigating Automated Home Valuation in Southwest Florida’s Turbulent Market
Zestimates® are estimates… they are just for “fun” but are consumers really, really clear on the fact that it’s not reliable? - Matt Rathbun via Twitter
Matt said what some of us in the real estate industry might have been thinking. A lot of us have spoken with both buyers and sellers of real estate that have thrown a street address in the search bar on Zillow® and thought the answer was gospel - grab a slab of granite and start carving. The consumer most especially finds it easy to disregard the small print when the figure is in their favor.
Take for instance any home in Bonita Springs, no, take my home in Bonita Springs, Florida. No one would be more familiar with my home than me, right? Throwing my street address in Zillow® I find a figure for my home that is likely $25,000 over what I would believe the value to be. Better yet, this figure is nearly $100,000 higher than the figure that was given about a month ago for the same exact home.
In this instance, what caused the Zestimate® to be skewed? The comparable properties chosen in this example are about as random as a blind folded orangutan throwing darts at balloons. The subject home was compared with Verandas in Highland Woods, condos in Bonita Fairways and homes 20 years senior to the subject on a canal or on a highway.
Face it folks, I got what I paid for in that free Zestimate®. It’s for entertainment purposes. If I was an average consumer and was I really serious about finding out what a home was worth I’d call a trained professional for a comparative market analysis or get a bonafide appraisal.
If you’re going to put your trust in a free, automated service [to value real estate] you have to expect room for the computer to either make errors or not know that it could be comparing an apple to an orangutans.
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on Friday, February 15th, 2008 at 6:20 am
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4 Comments so far
Hi Chris, it’s David from Zillow,
You obviously don’t have to read any fine-print to realize that a Zestimate is an “estimate”; that name was carefully chosen to avoid any confusion. Besides explaining Zestimates on the site, we also report on Zestimate accuracy in every MSA, County and City. As far as I know, no similar service transparently reports their accuracy. Come to think of it, I don’t think I’ve even come across a Realtor that reports on the accuracy of their CMA’s or list prices. Zillow’s accuracy metrics can be found here: http://tinyurl.com/fgz5k
I don’t know what your home is worth but according to our calculations, the median value of a home in Bonita Springs is around $320K. Interestingly, the median list price of the homes currently listed for sale on Zillow in Bonita Springs is $400K. $25K would be an 8% and 6% variance off those two median values respectively and if your home’s worth more than $400K, it would obviously be closer (and vice versa.) We would naturally love for Zestimate values to be more accurate but to bring some perspective to this discussion, I’m sure you’d agree that there are currently many sellers in Bonita Springs who would be all too happy if their home sold at 6% off its list price. Just looking at the gap between value and list prices of homes posted for sale in Bonita Springs, it seems like local sellers are currently less accurate than even the Zestimates in your market. We’re seeing this in many of the falling markets; human nature prevents sellers from reacting wisely to a drop in home prices. It’s the old “trying to catch a falling knife” syndrome. More than just entertaining (which they are), I think these numbers show that Zestimates can provide a useful starting point when researching home values in Bonita Springs but obviously one should consult a local expert when deciding on a list price or an offer.
On comps; it’s important to note that the comps list on Zillow is a list of “possible comps.” They are not directly used to calculate Zestimates i.e. a bad list of comps does not imply a bad Zestimate. Comps on Zillow are an output, not an input to Zestimate calculations. We do however realize that a very random comps list does shed unnecessary doubt on Zestimate accuracy and so we’re soon going to tighten up the comps parameters to produce a shorter, more accurate list.
Lastly, why did your Zestimate change so wildly? About a month ago we entirely replaced the Zestimate algorithms in our first major upgrade to Zestimates since launch. Zestimate accuracy improved significantly with this update which uses 20X more mathematical formulas and it measures trends in smaller, more localized areas. We measured a 12% improvement in accuracy with this change. I’m glad to hear your home’s Zestimate value improved as a result.
I hope this comment helps to add some perspective on Zestimate accuracy. We just released our Q4 home value reports. The report including value trends for Bonita Springs can be found here: http://tinyurl.com/2gjrbg.
Hi Chris. Congratulations on the recognition you are receiving that you so richly deserve. We are proud and excited to have you as a wonderful partner in our Bonita Spring Market Center.
You make us smile and help us everyday. The Keller Williams Elite Market Center is stronger and a more exciting place to be because you are with us.
Jim Murphy
Operating Partner
Thump Thump the sound the bus makes over Matt.
So would your Bonita Springs Property estimate be a Bestimate?
As a founding member of ORANGE (Orangutan Republic Anti-Negativity Gang - Eastcoast), I must tell you that I don’t appreciate having our primate brothers put forth in such a bad light.
I had to write SOMETHING!
Keep stirrin’ it up!