The Zillow estimate used to be spot on in our neighborhood, for several years even. Recently they all plunged to 10-20% below market value, even though all sales data puts it at the previous mark. The weird thing is that they also went back and recalculated old "Zestimate" data as well. On April 2nd the estimate for our house was $617,453, which is more or less what it would sell for. It had been above $600k since June, 2016.
This month it was $544k, and there's no sign it ever got above $580k in the historic graph. It claims it was $546k on March 31st.
One thing I did notice was a new button underneath the estimate: "I disagree with my Zestimate" which, surprisingly enough, is a lead gen for realtors, not a method to try and get them to change.
I know it seems weird to have the "old" data change. But, it's not observed data, it's estimates made at a point in time. The estimate comes from the property itself as well as the algorithm. If they changed the algorithm, do you think it would be better to recalculate the old values, or show a huge swing in your home value, implying some sort of market trend or issue with your house? If I were implementing it, I think I'd have to change the old data. I'd like to think I could sneak in an explanation / comparison, but that might get nuked for usability/UI reasons.
I used to run an online service predicting college admissions. As I would update the algorithms to incorporate new results, users' predictions would change. At first, I thought people would be pleased. Soon, I discovered that people really don't like the idea of their prediction changing when they have done nothing to cause it to change. Subsequently, I would lock in the values that had been "seen" by the user, and allow them to update their prediction, if they wanted to, when new models came online. This eased a lot of the users' expressed frustration.
They should be more transparent about their algo though. That would then allow users to actually know how they came to the conclusion that they did. Hopefully this lawsuit will reveal that algo.
Why would the lawsuit force them to reveal trade secrets? I don't see how you have any right to know how they arrived at the number they did. I can say publicly that I value your home at $5 and my neighbor bob can say its worth a million dollars.
These are both opinions and anyone seriously considering spending half a million or more can consider spending a modest amount on an appraisal.
There's a difference between an opinion proffered by a neighbour and an opinion from a large real-estate company.
The reality is people do trust the site, so law should take that into account. If a situation is making life harder for actual people, the fact that their behaviour isn't economically rational is not a good enough reason to ignore the problem.
Zillow is a information company providing a free ballpark estimate of a vast array of properties, not a real estate company. This is an important distinction. Neither party is paying them for an accurate estimate ergo they are not obligated to provide an estimate sufficient for either buyer or seller, which is why both sides are best advised to PAY for an accurate estimate before closing a transactions worth hundreds of thousands.
I'm honestly not seeing the problem here. Don't such people already hire experts to asses value before spending half a million dollars? I'm seeing the claim that inaccurate estimates lead to difficulties selling but I have yet to see the proof. Maybe those having trouble selling really are asking for more money than people are willing to pay.
...and Uber is just a software company, and Mastercard/Visa just facilitate payments.
The specific classification of a company is irrelevant. If they've induced their own gravitational field, then they're responsible for the consequences.
Assessors are obligated to be qualified because they are obligated to their clients who pay them money in exchange for their services.
How much did the seller in question pay zillow and what was promised in return?
The fact that person a's action foo can negatively effect you doesn't imply that the law or ethics precludes a from doing foo. A must be either violating your rights, the law, or have a duty to you that would preclude foo.
Its not clear how you could have a right to silence others speech in order to earn more money, its not clear what duty zillow has to sellers, and its not clear that the law actually precludes zillow from underestimating the value of your property.
In fact it looks an awful lot like none of those apply, and further that allowing anyone who feels like their property is undervalued to use threat of a lawsuit to silence discussion would preclude anyone from providing public analysis of property values whether accurate or not and thus harm the public at large. Real harm unlike the unproven harm previously discussed.
Zillow, should make it very clear then that their estimates are complete works of fiction and any resemblance to actual value is purely coincidental and unintended.
Well, it's really not a complete work of fiction... it's a correlated value estimate based on previous sale, and other property sales in a given market over time based on factors of the home (size, bedrooms, bathrooms, etc)... It may well not be accurate, as there may be other features that increase or decrease value.
That said, I would posit that if you're selling for more than a 20% variance from the Zestimate, that you are probably over/under-valued for the market. Just because you have gold-leaf throughout your home doesn't mean that it'll sell for a million when all your neighbors are half that.
When you seek the services of an agent and pay them money to help you buy or sell real estate they represent to you that they are qualified to assess the value of the real estate being bought and sold and are somewhat morally obligated to you by virtue of the money you paid them to provide you with accurate information.
Professional licensing requirements are supposed to ensure they are sort of kind of qualified.
Someone you didn't hire which is providing a ballpark guess on the value of your property to help people do preliminary research before they buy has minimal enough obligation to buyers and none at all to you.
We can see that the obligations of the agents above attach both to the fact that they are brokering 6-7 figure transactions and to the fact that you contracted them. Its hard to imagine what you believe the obligation is supposed to attach to in zillows case.
Its not even clear that regulating zillow according to each individual states laws would accomplish save placing unconstitutional limits on free speech. Plantiff doesn't even want that they want a club to compel zillow's silence or desirable speech. Surely cloaking it in bs doesn't make this any less unconstitutional.
The problem in Zillow's case may simply be the legal system... And that will vary greatly from state/county to state/county. The real estate market is very protective of itself.
Their algorithm is the very core of the Zestimate product. The value of the IP is incredibly important for the company, and they would be very stupid to reveal any details of its inner workings.
I live in a hot real estate market (L.A.), and I've spent about 5 minutes (no exaggeration) looking online at the prices of houses in my neighborhood, knowing the actual closing price of recent sales, and my first thought was that prices were about 10-20% below market value.
It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.
This is the same in Seattle, where a house's asking price can be 550, its zestimate (or Redfin estimate) will be around 570, and the price it actually goes for invariably ends up around 700. This has been the case for months, and it can almost seem like some sort of conspiracy between realtors and these meta-agencies to game the market. There are plenty of comps that show prices are WAY above what the 'estimates' show, and yet these professionals are seemingly oblivious. Fear of another 2008? Too much success drumming up bidding wars by underpricing? Whatever the reason, it's pretty infuriating as a buyer because it creates a sort of information asymmetry which makes a major decision really painful.
The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US.
The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.
Even without revealing the highest offer, the offers themselves constitute a silent auction, which is where a lot of the information asymmetry comes from. If I could speak to each of the other people and tell them I had X amount to spend we could all agree to walk away or make offers without going through a bunch of hassle and (for 32 of 33 offerers) heartbreak. The process really highlights to me how broken certain types of 'market' can be when there's a monopoly of information.
toomuchtodo: I am not sure if i would call it "true" value. The true value is what you'd get if you were to sell it again. Maybe at that same day, which sounds to me like the runner-up bid.
> It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.
I think you're completely missing the point of the tool and the last sentence in OP's post... They're getting it wrong on purpose to get signups.
I really like the Zestimate tool (if it's accurate), but it's pretty sleazy for them to use it this way. Most people won't research the market price for every house they see, and as long as the Zestimate is reasonable, they'll assume the sales price is too high.
My neighborhood is the opposite. Zillow will value a house at, say, $650k and it sells for $520k. It's not the condition of the house, either, since it's pretty consistent.
For my address, it's currently showing 468k, and says that's a drop of 137k from one month ago. I'm positive that 468k is around 100k too high to be realistic. I bought for 265 in 2010, and I've been seeing units around me sell for around 350k recently. Redfin agrees with me, showing sales between 303 and 380, depending on unit size and upgrades.
It's a rough estimate, but it is not always lower. A place near me was listed for $625k below the Zestimate, and is selling for 725k below the Zestimate (which was $2.4M). A below market rate sale in your area, such as a foreclosure auction, can drive automated price estimates down. A transfer of ownership to a trust, which can be at an old sale price or even zero dollar, is tough to discern in the metadata of some localities and will drive the $/sqft down.
Given the many wild overestimates, I don't suspect that they are trying to have their model dampen price estimates to drive referrals. However, the price estimates at Redfin seem much more accurate, so their model could use some work.
I just went and tried this. The Zestimate for my place is... ludicrous. Probably 30% below market value. What's more, similarly sized apartments on the same floor vary by 15%!
I'd always thought this number was dumb but wow. This is even more ludicrous than I could've believed.
How can it be this far off with apartments with recent sales history in a building with lots of unit (and thus lots of sales activity)?
Could this be a case of them A/B testing on the Zestimate model to maximize lead generation with the "disagree?" link?
similarly sized apartments on the same floor vary by 15%
Is that so unreasonable. In the building I used to live in for example the apartments on one side of the house had a beautiful view from the balcony and the ones on the other side didn't. The view side apartments consistently sold for more. I've also looked at apartment buildings where the floor size is basically them same for two apartments, but the layout was different, and people where willing to pay more for the apartments with the better layout.
Highly unlikely. You do not cause this level of pricing swings in an A/B test. Additionally, A/B testing this much of a price swing heavily discounts the value of the tool.
They have my house around 680K. If I were to guess what I could really sell it for I'd guess around 580K, based on a recent nearby sale. My house is a little odd and there aren't many good comps for it.
At one point a few years ago the Zestimate was about 540 and my house was appraised for 450.
And when we bought it 5 years ago the Zestimate was at 380 and we bought it for 420.
I once heard to expect the Zestimate to be off by ~20% in either direction. That seems to be holding here.
It has been at least $100k way too high in our neighbourhood for well over a year. I'm not sure quite how they go so far off, there has been a slow but steady rate of house sales around to set their data from. Consistently the Zestimate has been noticeably over the market value, and it has been annoying sellers.
I just looked at my house and I think the Zestimate is too high.
I bought the house 9 years ago and the Zestimate is about $10k more than I paid. It's right in line with what the previous owner was asking when he sold it but I wasn't willing to pay that and I likely couldn't sell it for that much.
If true and you can prove it, this may be valuable information in prosecuting Zillow for some pretty illegal and perverted stuff. I hope you will share this information with someone who can punish Zillow for this.
Punish zillow for what? Seems to be a confusion between something would benefit me/may harm me and the other side having any sort of obligation to consider your position.
An inaccurate estimate from someone who you paid nothing and whom owes you nothing may make your life more difficult but this doesn't imply they owe you anything.
Market manipulation is illegal. Whether or not there's a business relation between buyer and Zillow or seller and Zillow is immaterial. All the DA needs is an initial suspicion that someone related to Zillow profited from the manipulation.
What market manipulation? First we haven't seen proof that zillow's zestimate is effecting real prices. Presumably after initial research stages people have an actual assessor come in before closing.
Then you have to show that they profited from such manipulation rather than you know from ads.
It looks more like they changed their algorithm and rather than show imaginary swings in the value of homes revised their historical projections. This makes tons of sense if you understand the historical data to mean this was what the property was worth in 2010 as opposed to in 2010 this is what we thought it was worth.
In fact this interpretation is the logical one. Nobody cares what zillow thought in 2010 they care what the historical value was.
> The weird thing is that they also went back and recalculated old "Zestimate" data as well (...) there's no sign it ever got above $580k in the historic graph.
This month it was $544k, and there's no sign it ever got above $580k in the historic graph. It claims it was $546k on March 31st.
One thing I did notice was a new button underneath the estimate: "I disagree with my Zestimate" which, surprisingly enough, is a lead gen for realtors, not a method to try and get them to change.