More than 3 years ago I posted on just how inaccurate Zillow’s Zestimates are in Chicago. I’ve been meaning to update this analysis and even include a few more reference estimates – Zillow doesn’t have a monopoly on randomly generated automated estimates. I still intend to do this but in the last week I noticed a couple of developments that suggest that maybe Zillow’s been taking a bit of heat lately on the inaccuracy of their Zestimates.
Apparently the CEO of Zillow appeared on CBS This Morning recently and was asked about the accuracy of their Zestimates. I haven’t been able to find the video of this interchange but according to an LA Times article Spencer Raskoff replied that the median national error rate is about 8% (it’s actually 7.9% according to the Zillow Web site).
OK. Let that sink in for a bit. Notice that that’s a median error rate, which means that half the homes will have an error rate higher than that. But I will give them credit for transparency because they do have a spreadsheet available on their Web site that provides a bit more detail. Here is the detail for Cook County and note that they apparently measure error rate the same way I did 3 years ago – comparing their valuations before a sale to the subsequent sales price:
- Median error rate is 10.2%
- Only 26.8% of the homes are within 5% of the sales price
- 49.1% are within 10% of the sales price
- 74.4% of the homes are within 20% of the sales price – i.e. 25.6% have error rates greater than 20%
Then, 4 days after the LA Times article appears Zillow sends out an email to their premier agents with a link to download Talking Points: Scripts For Explaining The Zestimate To Clients. Coincidence? I think not. As the LA Times article pointed out the Zestimate is a real sore spot for realtors because their clients keep referring to them even though they are total crap half the time – and realtors are Zillow’s real customers.
Zillow provides this talking point to realtors who have a client fixated on the Zestimate:
A person might use WebMD to look up their symptoms, but they still consult their doctor if they want a truly accurate diagnosis. It’s the same with using only a Zestimate to price a home: It’s a good idea to get a professional opinion to give you the most accurate figure.
The reality is that Zillow is actually an entertainment site. Their goal is to get lots of people hitting on their site so that they can turn around and sell those leads to real estate agents. And apparently they are quite successful in this endeavor because they got 73 MM unique visitors to their site in December. So it really doesn’t matter to them how accurate their estimates are as long as people keep coming back. More on that another day.
#realestate #Zillow #Zestimate
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