Zillow Zestimates: When Alogorithms Just Don’t Work

When talking about real estate in the digital age it’s hard to avoid the behemoth of a topic that is Zillow. Yet despite the prevalence of Zillow in today’s real estate sphere, the company is quite distanced from the real estate market itself. The Zillow site states “Zillow serves the full lifecycle of owning and living in a home: buying, selling, renting, financing, remodeling and more.” This is technically true, but Zillow doesn’t actually carry out any of those lifecycle stages. Instead, Zillow acts as one of the largest real estate databases in the world, hosting information on over 110 million US homes.

What has made Zillow so popular is the format and content of the data it hosts. The site clearly lists data such as square footage, listing price, days on market, features, and countless other stats and facts that buyers crave including “Zestimates”, inhouse value estimates shown right under the listing price. With such an important value being left to inhouse estimation the question arises, how does Zillow estimate the value of tens of millions of properties, and exactly how accurate are these estimates?

This simple question has been explored by many, including Fortune which found that Zillow has estimated the value of just under 60% of US housing stock, but has only estimated 65% of these homes within a 10% margin of their selling price. This information, combined with data from Zillow’s own site proving the average Zestimate was off by $14,000 in July of last year, show Zestimates to be loose guidelines for value at best.

The shoddy accuracy of Zestimates isn’t exactly breaking news. Any real estate expert would know that an agent with specific market knowledge such as home condition, room flow, landscaping, traffic noise, and other “unzillowables” would provide a much better estimate than an algorithm tailored to loosely fit every home in America. Yet the legality of these subpar value estimates is still up in the air, and has been since the first of many complaints/lawsuits was filed against Zillow’s Zestimates in 2006.

At the end of the day the legality of Zestimates can only be decided in court, but whether they remain legal or not one thing is for sure, Zestimates are no replacement for an actual estimate and probably hurt prospective buyers more than they help.



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