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How Do We Come Up With Those Zestimates?

Whenever I read a post about Zillow there are inevitability comments that sound like something from GoldilocksGoldilocks_on_josh_and_joshand The Three Bears fairy tail- My Zestimate is too high, My Zestimate is too low, My Zestimate is just right.... 

My answer has always been the same, it is simply a starting point and is no way an appraisal.  It is something that attracts users to the site and creates a massive and dynamic audience for you then to market to, whether that be posting your listings for free or participating in a Discussion. 

We will never be 100% accurate, we know this.  We obviously haven't walked through the house or looked at comps with a human eye- that is why you hire a professional.  Zillow is actually one of the few sites that is completely transparent about just how accurate we are, down to a local level.  There is a link at the bottom of our homepagewhere you can get this information.  If you are an Agent that comes up against Zestimates a lot in listing presentations, I highly recommend you print the accuracy chart and use it to your advantage. 

But the question still remains, how exactly do we come up with that Zestimate?  And furthermore, what are we doing to make it better?

The most significant factor that impacts how the Zestimate accuracy how much data is availablethrough your local county and the frequency in which they update this information.  All of this information is then pumped into a complex formula.  When our statisticians developed the model to determine home values, they explored how homes in certain areas were similar (i.e., number of bedrooms and baths, and a myriad of other details) and then looked at the relationships between actual sale prices and those home details. These relationships form a pattern, and they used that pattern to develop a model to estimate a market value for a home.  If you want even more information about what a Zestimate is, I invite you to visit the 'What is a Zestimate Value" page on the site. 

What are we doing to improve on accuracy?  We recently added a number of new data sources(all done behind-the-scenes), on both on local and national levels.  We also made a dramatic change to the way Zestimates are calculated by increasing the number of statistical models that are used in determining the number by 20 times!  For example, the way a Zestimate is calculated in CA (you lucky Prop 13 people!) is not looked at the same as a home in IA, verse the way a home is looked at in a non-disclosure state like Texas.  Not only can these models differentiate between states and cities, but they are now looking more closely at various areas within a specific city. 

We now take into account homeowner-added facts when calculating the Zestimates.  To date over 1,000,000 homeowners have edited something about their home!  Doing all this immediately resulted in a 12% improvement in Zestimate accuracy nationwide. 

I want to note one final change on the site that we made a few weeks ago.  We used to display the Zestimate at the top of each home's page, right next to the For Sale price.  Based on the feedback from MANY agents, we changed the layout of the home detail page to push your information and the home's information to the top of the page.  We removed the Zestimate from the title of the home, so that your For Sale price is the only number prominently displayed at the top, and demoted the Zestimate below the fold of the page.  This way we are drawing the most attention to the number that came from a professional, verses a computer. 

  

Hopefully this will give you a little insight as to why the numbers are what they are.  It is these Zestimates, and all the other functionality on Zillow, that are bringing MILLIONS of people to the site every day.  As an real estate agent, this is the asset of Zillow that can be very valuable to you- the real people that you can now get your message out in front of. 

At the end of the day, the consumer still needs a professional to help determine an asking price that is JUST RIGHT! 

 

                    

(I am not exactly sure what "porridge is??)

 

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Comment balloon 18 commentsSara Bonert • January 21 2008 12:55PM

Comments

Your final sentence hits the nail on the head.  "At the end of the day, the consumer still needs a professional to help determine an asking price that is JUST RIGHT!"  I'm sure Zillow is doing everything it can to be user friendly.  It's a lot of work and I'm glad someone out there is doing it instead of me.
Posted by Jon Miller (United Country-Marshland Realty) over 12 years ago
I'm meeting with a potential client next week who keeps referring to zillow regarding the price of his home. Thanks for the info it will come in handy.
Posted by Jean Doyle, Morris and Sussex NJ Real Estate (RE/MAX House Values) over 12 years ago
Jon- I noticed you were with United Country.  FYI- They are doing a daily feed of listings to the site on your behalf. 
Posted by Sara Bonert, Real Estate Internet Marketing (Zillow) over 12 years ago
I need to be honest with you...until your company changes its attitude (and I mean from the top) I have no interest in you. I think this industry has enough blood suckers who are either trying to get a portion of the commission Realtors work for...or they are parading themselves around as FREE sites...until such time as they can gather enough information so they can sell it to other companies that want part of the commission a Realtor works for. The average Realtor makes 46k a year. Why not concentrate on helping Realtors instead of pleading for them to help you.
Posted by Jeffrey DiMuria 321.223.6253 Waves Realty, Florida Space Coast Homes (Waves Realty) over 12 years ago
Thanks for the new information about Zillow. I confess that it has been a while since I have visited the site and will have to check out the changes. It sounds like the changes are all positive!
Posted by Libby Cousins, Contract Mortgage Processor, licensed in WA (Extraordinary Processing) over 12 years ago

Team DiMuria-  First of all, Zillow has NO PLANS on getting involved in the transaction.  We are a media company and make our money from selling advertising on the site (ie Home Depot, Bank of America, Honda, etc). 

We have developed unique, compelling content that draws a large audience.  We then invite Agents to market themselves FREE to this audience.  I most definitely consider this 'helping Realtors'! 

Posted by Sara Bonert, Real Estate Internet Marketing (Zillow) over 12 years ago
Porridge is kind of like oatmeal, except oatmeal has relatively few historical temperature-control problems
Posted by Andrew over 12 years ago

We all need to work together to educate consumers.  There's a lot of information out there but that doesn't mean that all consumers know how to analyze it and apply to their situation.  That's why they need professional advise.

Thanks for the post, Sara. 

Posted by Marzena Melby, Realtor, Twin Cities Minnesota Real Estate (Coldwell Banker Burnet Realty) over 12 years ago
Sara - Thanks for shedding a little more light on how Zillow does what it does. See you in SF!
Posted by Tom Plant (WINEormous.com) over 12 years ago
Hello Sara, It sounds like Zillow is trying to improve its reputation with Realtors.  However, I'm not a fan.  The general public thinks that Zestimates are just as good as a professionally prepared CMA.  I did a Zestimate on my house and the comps it used were ridiculous, I wish that my house was worth that much!  I've tried it on other homes in my area and have found it to be useless.  Everyone wants a piece of the real estate pie these days.
Posted by Cheryl Powell - The Powell Team, Concord,Harrisburg & Charlotte NC Area Real Estate (Southern Homes of The Carolinas - The Powell Team) over 12 years ago
I am not a big fan of zillow, even though I have my listings posted there. I have never met a consumer yet who as ever heard of zillow, is there any sort of national advertising? I don't want to complain to much since the site is free, maybe its just me because I live in a small town, maybe in the big cities it's a great tool? If any one has a real positive impression of zillow let me know? Thanks  www.MontroseHomeConnection.com 
Posted by Alan Brown, 29 Years of Real Estate Experience . (Coldwell Banker Montrose Colorado) over 12 years ago

Alan- I have to say say that I usually hear the opposite when it comes to traffic- that agents often find out Zillow through one of their clients.  In January Zillow had 4.6 million unique people visit the site.  A major of these were non-industry professional (ie homeowners, home buyers).  We see some relationships between how thorough and complete the data is to user traffic.  Here is table to you to reference for the state of Colorado - http://www.zillow.com/howto/DataCoverageZestimateAccuracyCO.htm

Also, note that you can see how much traffic each of your listings have received by visiting them on Zillow and clicking on the Home Info button in the left hand column.  That would be a good place to look to see if anyone is visiting your listings.

Posted by Sara Bonert, Real Estate Internet Marketing (Zillow) over 12 years ago
Sara - many of our clients do know of Zillow. I appreciate the chart that I can show them regarding the accuracy of the Zestimates in the Tampa Bay area.
Posted by Sharon Simms, St. Petersburg FL - CRS CIPS CLHMS RSPS (Coastal Properties Group International - Christie's International) over 12 years ago
I hope the accuracy increases since so many clients go to Zillow and then ask us why the numbers are so different from what we give them.
Posted by Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional, Palm Harbor, Dunedin, Clearwater, Safety Harbor (Charles Rutenberg Realty) about 12 years ago
Though the Zestimate is sometime not accurate and it is okay as they haven't seen the house from inside, but the information regarding the house that is there in Zillow is just too good. It has been a great help for me in looking for the purchase. I do not have to ask my realtor for all the info of the house..I can easily see those info at the zillow.com any time during the day..Great work Zillow team..
Posted by Anurag about 12 years ago

I realize I'm late getting into this discussion, but I do have a bone to pick with Zillow home value estimates. One big pricing factor seems to be missing;-lot size. Last year I had a listing on 2.70 acres in the estate section of a subdivision. The remainder of the subdivison had homes on one acre lots. Zillow had my listing overpriced in the subdivision because land size wasn't factored in. I have a current listing on one acre in a small secluded subdivision in a city that most other homes are on 5000-10000 square foot lots. Why can't Zillow add a land size factor to the value formula? This home is more expensive than 88% of the homes in the city and 81% more expensive than homes in the county; how valuable is that information? Nicer homes are always more expensive than the norm, but prospective buyers can/will be misled by information like that. I live in Texas by the way.

Posted by John Beavers (Century 21 Ross Group) about 11 years ago

John, When we have lot size, we indeed do figure that into the valuation.  The issue can be actually getting that data.  However, we do take a daily listing feed from Weichert (I see that is the company you are with).  Once we get the lot size in the FOR SALE feed we receive from them, the information on the size and in 'the formula' is updated and Zestimate would recalculate accordingly. 

Also, if you wanted to, the owner or agent, could come to the site and create an "owner's estimate" stating why the home should be priced differently (ie corner lot, school district, upgrades) and they can choose to publish this to the site.  But between the list price, an owner's estimate and our Zestimate, the for sale will be the only number that appears in search results and is the most prominent number and the first number at the top of the property detail page. 

Posted by Sara Bonert, Real Estate Internet Marketing (Zillow) about 11 years ago

Ok Sara, I'm becoming more involved with ActiveRain and Zillow so I'm sure we'll chat more in the future. I will check out the agent response to pricing, but keep in mind that I have to deal with an uninformed buyer choose not even look at a listing based on the Zillow valuation. On a positive note you being so involved is great and has to lead to better understanding between agents and Zillow.

Take care,

John

 

 

Posted by John Beavers (Century 21 Ross Group) about 11 years ago

Participate