The public’s perception of Zillow seems to give their “Zestimates” more credence that they actually deserve.
Zillow has novelty value in the ability to insert an address, for a “real time” home value estimate or a Zestimate within seconds.
However, I have a couple of examples to share, that demonstrates just how unreliable these numbers can be:
This from an email received this week about my listing on Encelia Drive, La Jolla:
Zillow shows a value of about $4.5M, so how can an offer of $2.6 – $3M be legitimate ? Unless Zillow is way off.
My first reaction was “You think?”, I thought better of it though and headed over to Zillow – this is what I found:
Zillow valuing my listing over $4.6M, that’s bad enough, but wait what are those other numbers??
Range: $2.68M to $9.23M. Zillow says that more data will provide more accurate ranges.
Earlier this year, Zillow updated their algorithms to try to correct some of the problems. But the algorithm still incorrectly assumes that your neighbor’s home, can be regarded as a comparable to your home. Zillow however does not know about any capital improvements, or lack of maintenance on your or your neighbors homes.
Zillow also cannot distinguish between a smart contemporary versus a historic Spanish on the same street. Or the home with the stunning ocean view versus the homes right opposite with zero views.
Zillow doesn’t really care about accuracy.
If they cared these percentages here would be unacceptable in any serious valuation model. Nearly half of San Diego Zestimates were “within 10% of actual sale prices”.
Looking at the chart I’m given to assume that nearly 75% are more than 5% wrong. In this price range 5% is around $150,000 – enough to buy a whole house in most parts of the country 🙂
The second example is an email from a long term out of State client:
We still own our two rental condos in San Diego. I have been updating my personal financials with an estimated value of the properties using Zillow, but that can vary widely with reality.
At least he get’s that it’s way out to start with. So OK, we head over to again and this greets me:
Are you kidding me? It’s so far out that’s it’s ridiculous, the chart shows the home has doubled in value in less than 2 years and now worth $685,000. NOT!
In the real world the last comparable sale of a similar townhome a couple of streets over closed at $380,000 last August. Client was understanding, if just a little disappointed – but reality is everything in this game.
At the end of the day true market value is based on what a real life buyer is willing to pay for your home at the time when your home is advertised for sale.
AVM’s (Automated Valuation Systems) undoubtedly will get better, but Zillow is going to have to try quite a lot harder on getting closer to reality.
Do you believe me now when I say:
“Zestimates” are strictly for entertainment value?
Please let me know in the comments if you have other examples of Zillow getting it wrong.