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How Bad Are Zillow “Zestimates”?

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Re: How Bad Are Zillow “Zestimates”?

#121

Post by leereeves »

robbyking wrote: post #93
DennisP wrote: post #91

Earlier quoted context omitted.

A long time ago I got a real estate appraiser's license. Here is the procedure for appraising real estate, as taught by my state: 1) Pick three homes that you feel are comparable. 2) Pick out the material differences between those homes and your client's 3) Make up a value for each of those differences, and adjust accordingly (Unofficially speaking) If you don't like the number you come up with, just make different d…

In the late 90's I worked for an online mortgage broker, and 9 times out of 10 when we ordered an appraisal, the appraiser would ask us what the selling price was and return an identical figure for their estimate.

Amazing that people still pay for that.

Re: How Bad Are Zillow “Zestimates”?

#122

Post by pdubbs90 »

mcherm wrote: post #63

I am quite disappointed in the research that went into this article. (1) Author discovers that Zillow has a specific claim about accuracy: "around 90% of the listing Zestimate is “Within 20% of Sale Price” of the home". Author then gripes that this is "a really large margin for error". Really? Because I was prepared to praise Zillow for such honest and clear reporting. It only costs a few hundred dollars per home (Zi…

I feel like disappointing research is going to be a given when you have such an obvious conflict. The author has a strong motivation to make Zestimates seem bad (the less reliable the resources you have to buy/sell a home on your own are the more you'll need to contact them) and a million degrees of freedom (which neighborhoods in which cities, price floor for consideration, how many examples to pull ...) to get the answer they want.

"Research" of this type should probably never be trusted.

Re: How Bad Are Zillow “Zestimates”?

#123

Post by EpicEng »

honkhonkpants wrote: post #112
EpicEng wrote: post #100

Earlier quoted context omitted.

Certainly you can influence the appraiser, but the way you state it is nonsense. Their job is also to provide feedback to the buyer, they won't just pull any number you like out of a hat.

Appraisers absolutely do pull numbers out of hats, because appraisers who regularly fail to write down a large enough number will stop getting calls.

That has not been my experience at all, and I'm pretty sure lenders would have a big issue with that if it were as rampant as you say.

Re: How Bad Are Zillow “Zestimates”?

#124

Post by jedberg »

A very smart statistician who worked for Amazon once said, "estimates are useless without error bars". The problem with Zillow is they really should just show a range, not a fixed number that appears to be accurate to the ones place.

Edit since I wasn't clear: I know they show a range in tiny text, but they main number they show should be the range if they want to avoid all of the "is Zillow accurate" articles.

Re: How Bad Are Zillow “Zestimates”?

#125

Post by wheelerwj »

DennisP wrote: post #91
mcherm wrote: post #63

I am quite disappointed in the research that went into this article. (1) Author discovers that Zillow has a specific claim about accuracy: "around 90% of the listing Zestimate is “Within 20% of Sale Price” of the home". Author then gripes that this is "a really large margin for error". Really? Because I was prepared to praise Zillow for such honest and clear reporting. It only costs a few hundred dollars per home (Zi…

A long time ago I got a real estate appraiser's license. Here is the procedure for appraising real estate, as taught by my state: 1) Pick three homes that you feel are comparable. 2) Pick out the material differences between those homes and your client's 3) Make up a value for each of those differences, and adjust accordingly (Unofficially speaking) If you don't like the number you come up with, just make different d…

This is how it USED to be done, and was a significant contributor the housing bubble that lead to the recession.

It's different now, not necessarily less subjective but the incentive for creative appraisals has been drastically reduced. Prices have to be justified and mortgage brokers can't interact with the appraisers now. Apprasing has to be entirely separate from the underwriting process and is now entirely blind. In some states, appraisers are now accountable for significant deviations. The turnaround time is also significantly longer. I've heard reports from some people of appraisals in bigger markets taking as long 9 weeks.

It's actually a pretty interesting process, ripe for disruption if anyone wants to take a crack at it.

Re: How Bad Are Zillow “Zestimates”?

#126

Post by jandrese »

robbyking wrote: post #93
DennisP wrote: post #91

Earlier quoted context omitted.

A long time ago I got a real estate appraiser's license. Here is the procedure for appraising real estate, as taught by my state: 1) Pick three homes that you feel are comparable. 2) Pick out the material differences between those homes and your client's 3) Make up a value for each of those differences, and adjust accordingly (Unofficially speaking) If you don't like the number you come up with, just make different d…

In the late 90's I worked for an online mortgage broker, and 9 times out of 10 when we ordered an appraisal, the appraiser would ask us what the selling price was and return an identical figure for their estimate.

When we were selling our home we didn't have a good idea of what it was worth so we called an appraiser and the first think he asked was "what are you selling it for?" Then we found out that even if we paid him a couple hundred bucks he wouldn't even come out and inspect the house before "appraising" it.

We ended up just guessing high and lowering our price a couple of times until someone bit.

Re: How Bad Are Zillow “Zestimates”?

#127

Post by jedberg »

> If you excluded trust sales and probate sales or family-to-family type Quit Claim transfers (where the property is transferred at a considerably lower value from its market value) shouldn't the Zestimate reset to the exact amount of the property's last sold price?

No, it should not. My personal example: When I bought my house, I bought it for 20% less than what Zillow said. But Zillow would have been right on the money if my house were in average condition. But it wasn't, it was unliveable. The first thing we did, before we moved in, was spend 9 weeks renovating it. Even then we didn't even bring it up to the local average. It took us five years to finally finish all the work.

Zillow estimates assume the house is in average condition, because they have no way of knowing otherwise.

Re: How Bad Are Zillow “Zestimates”?

#128

Post by URSpider94 »

leereeves wrote: post #121
robbyking wrote: post #93

Earlier quoted context omitted.

In the late 90's I worked for an online mortgage broker, and 9 times out of 10 when we ordered an appraisal, the appraiser would ask us what the selling price was and return an identical figure for their estimate.

Amazing that people still pay for that.

"People" don't. It's a required part of the due diligence to get a mortgage. No appraisal, no loan.

For the most part, the banks and brokers re-sell those loans immediately, so they don't stay on their books. All they need to protect them from lawsuits later is proof that they followed the process to the letter -- which involves getting a written appraisal.

No mortgage broker or Realtor ever got rich by picking a fight with the appraiser to lower the appraised value ... there is literally nobody present at the table who has an incentive to push the value down.

Re: How Bad Are Zillow “Zestimates”?

#129

Post by lutorm »

jedberg wrote: post #124

A very smart statistician who worked for Amazon once said, "estimates are useless without error bars". The problem with Zillow is they really should just show a range, not a fixed number that appears to be accurate to the ones place. Edit since I wasn't clear: I know they show a range in tiny text, but they main number they show should be the range if they want to avoid all of the "is Zillow accurate" articles.

Except Zillow actually does show a range. If you look at the Zestimate details on a house, you see something like this:

"Zestimate $472,603", and immediately to the right: "Zestimate range $425k - $506k". The little question mark reveals:

"The Value Range is the high and low estimate market value for which Zillow values a home. The more information, the smaller the range, and the more accurate the Zestimate. See data coverage and accuracy table."

Re: How Bad Are Zillow “Zestimates”?

#130

Post by URSpider94 »

jedberg wrote: post #124

A very smart statistician who worked for Amazon once said, "estimates are useless without error bars". The problem with Zillow is they really should just show a range, not a fixed number that appears to be accurate to the ones place. Edit since I wasn't clear: I know they show a range in tiny text, but they main number they show should be the range if they want to avoid all of the "is Zillow accurate" articles.

They DO show a range, it's just in fine print next to the number. You have to look for it, but it's not hidden at all.
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