I have suspected that consumers rely on their zestimate more than we’d like to admit.
It’s been around for ten years, so it’s familiar and easy. Because there isn’t any other internet tool like it, homeowners follow their zestimate and fantasize about their equity position – and start believing. Zillow sends regular reminders which reinforce that there might be something to it.
When I’m talking to sellers, if my price is different than the zestimate, I better have a good explanation. Likewise, I don’t mind when the zestimate is above my list price. If buyers happen to believe in the zestimate’s accuracy, then it helps make my listing look like a deal.
But the truth is that the zestimate is wildly inaccurate and heavily manipulated by Zillow to suit their own needs – especially in their quest to buy homes from coast to coast.
A good friend has been contemplating the sale of this home in Santa Monica. We have watched the zestimate rise steadily over the years, and once it touched $8,000,000, we thought it would be a good time to put it on the market and hope the zestimate would help propel the sale.
As we prepared to launch the listing, I monitored the zestimate closely:
June 16th Zestimate
The zestimate had gone up $362,339 in the last 30 days, and was well into the $8,000,000s. We planned to list for $6,950,000, which would have looked very attractive, relatively.
The next day, our zestimate got revised.
June 17th Zestimate
Whoa – it dropped $3,284,879 in one day???
We had committed to at least conducting some price discovery, so we listed for $6,950,000 on June 22nd.
What did Zillow do?
- They changed the zestimate to the EXACT list price,
- They suggested a sales range evenly around the list price
- They erased the history of the $3,284,879 drop from five days prior:
June 22nd Zestimate
The zestimate went from $8,195,161 to $4,910,282 to $6,950,000 in less than a week.
You’d be crazy to trust anything they say.
It was the erasing of the previous drop that is the most disturbing – which they have done for years. If you drop $3 million in one day, then stick with it – don’t recreate history just to make yourself look better.
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Seattle real estate giant Zillow Group announced new tweaks to its Zestimate tool that provides home value data on more than 104 million properties. The company now uses machine learning-based neural networks and additional data that improve how quickly the algorithm reacts to market trends.
Zillow said Zestimate’s national median error rate for off-market homes is now 6.9%, an improvement of nearly a full percentage point. The median error rate for on-market homes is 1.9%.
Using neural networks was a technique used in 2019 by the winners of the ZIllow Prize, a competition to improve the Zestimate.
Zillow launched the Zestimate in 2006. It marked the first time that homeowners gained access to estimated home values — data that was previously only available to real estate agents, appraisers and mortgage lenders.
Some have criticized the tool over the years. A group of homeowners in Illinois sued Zillow in 2017, alleging that the Zestimate tool is often inaccurate and difficult to get changed, and that Zillow markets it as roughly equivalent to an appraisal. The homeowners argued that the tool undervalued their homes and made it harder for them to sell. A federal appeals court sided with Zillow in the lawsuit.
Zillow is now using the Zestimate to make cash offers on homes, part of the company’s new focus on the end-to-end home-buying and selling experience.
https://www.geekwire.com/2021/zillow-group-uses-machine-learning-improve-zestimate-algorithm-dynamic-market-conditions/
I like that house. Franklin & Montana in SM is about as pure residential in the big city as you can get short of the Brentwood Rotary neighborhoods. https://www.google.com/maps/@34.0531557,-118.4887723,16.81z
Used to live about 8 blocks away. Here’s to a successful bidding war.