Zestimate Accuracy: Why did Zillow CEO’s home sell for 40% less than its Zestimate?
Home owners across the country love to question their Zestimate accuracy. When it comes time to sell, the estimated market value calculated by Zillow can be the jumping off point for an interesting discussion between real estate agents and sellers.
Spencer Rascoff, CEO of the Seattle-based real estate media website, sold a home in the city’s Madison Park neighborhood for $1.05 million at the end of February. On March 1, the day after the sale, the Zestimate for the home reached $1.75 million. On Zillow’s website today, it’s come down to $1.571 million.
The company’s data coverage and accuracy web page indicates that there are 102.7 million homes with Zestimates on Zillow. Nationally, the Zestimate accuracy has a median error rate of 7.9 percent, which means half of the Zestimates in an area are closer than the error percentage and half are farther off. The Rascoff property falls into a category of about 20 percent of sales in which the Zestimate misses the sale price by more than 20 percent.
Ryan Kirkham, past president of the Utah Association of Realtors, recently said, “In Utah, we find values estimates from Zillow and other automatic valuation models (AVM’s) to be highly inaccurate and I would caution any seller from using them for any type of meaningful analysis. The reality is that in Utah, Zillow doesn’t have access to sold data from the multiple listing service which is why Zillow uses an algorithm to estimate home values which is usually inaccurate. You can’t price a house without knowing the micro-markets, without knowing the neighborhoods, the schools, everything that goes into a pricing a home.”
“Zillow wants to give a good ballpark idea of value any given home” says Skylar Olsen, a senior Zillow economist. Zillow says the number probably won’t be perfect because they don’t really know what’s behind your front door. “We’ve never been to your home, we don’t know the special layout of your kitchen,” Olsen says. “That’s hard to quantify. The Zestimate can’t know about it and can’t incorporate it into your home’s value. It’s a great starting place, but not the end point.”
Zillow has said people can be mislead by not recognizing that price is a random variable and that the range of prices that a home could sell for creates these opinions of value.
Kirkham concluded by saying “I’ve said this for years and I believe it now more than ever, Real Estate is a very local event and should be handled by well trained Realtors who use facts, data and expertise to come up with realistic values as opposed to guessing or using algorithm’s to find value. I’m guessing Mr. Rascoff now understands the value of a Realtor with “Real” facts to price homes, even if he’s not willing to admit it openly.”