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How Bad Are Zillow “Zestimates”?

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Re: How Bad Are Zillow “Zestimates”?

#181

Post by cestith »

Bartweiss wrote: post #66
jannotti wrote: post #10

I don't have an opinion on whether zestimates are accurate. But this blog post has 9 samples from only 3 cities. And the author seems to be making claims based on that. This is a lame "thought leadership" post as a subtle ad for his company. At least give me 10-20 homes in each of 10-20 cities if you are trying to convince me of something systematic.

The only really interesting thing I saw in this post was the discussion with realtors. It's significant that Zillow uses long-term averages, and therefore can't price in abrupt market shifts even once they're common knowledge. If nothing else, it implies that "Zestimates" are a bit dubious in tight urban markets where high variance is more possible. Of course, it also looks like Zillow is aware of that challenge. The…

Perhaps Zillow is more interested in showing the longer-term market value of a home so buyers know if they're being asked for a high demand-driven price. A tight market like that can spring up quickly and fade away just as quickly. At some point most people are going to look to resell or to at least not be forever upside down because they bought during a tight market.

Re: How Bad Are Zillow “Zestimates”?

#182

Post by spydum »

smsm42 wrote: post #172
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…

It's kind of scary that million dollars' decisions (and in aggregate, probably billions) are made on the basis of solely "let's look what others are doing and then fudge it based on gut feeling until it looks kinda plausible" and that's supposed to be expert verdict. Not that I can offer any better idea :)

Haven't you just described 90% of the VC investments made in startups in the last few years?

Re: How Bad Are Zillow “Zestimates”?

#184

Post by jungrothmorton »

yoloswagins wrote: post #183
cinosan wrote: post #176

If you have a SFH try this out. Way better than zillow. https://www.housecanary.com/

Which house canary product does free home valuations?

We have free trials of our valuation product, Value Report: https://www.housecanary.com/product-value-report

Re: How Bad Are Zillow “Zestimates”?

#185

Post by r0m4n0 »

honkhonkpants wrote: post #52
ensignavenger wrote: post #18

Earlier quoted context omitted.

Yeah, but how accurate are appraisals? Several years ago I was reading about an analysis that found that Zestimates were about as accurate as appraisals are 80%+ of the time.

The job of the appraiser is to write down a number as large as or larger than the amount to be financed. They know this and they know the number in advance. What they do is not rigorous.

Definitely not true... there are many checks in place to ensure this doesn't happen

http://www.freddiemac.com/loanadvisorsuite/loancollateraladv... http://www.freddiemac.com/loanadvisorsuite/faq/loancollatera...

This doesn't even take into account the process for appraisal management companies (third parties).

Re: How Bad Are Zillow “Zestimates”?

#186

Post by gozur88 »

URSpider94 wrote: post #128
leereeves wrote: post #121

Earlier quoted context omitted.

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 fig…

This. As long as the appraisal is close enough for plausible deniability, it serves the purpose. The originator just needs a number that's close enough for reality that whoever they sell the loan to (probably the government) can't come back and accuse them of fraud.

Re: How Bad Are Zillow “Zestimates”?

#187

Post by dragonwriter »

leereeves wrote: post #155
URSpider94 wrote: post #128

Earlier quoted context omitted.

"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 fig…

I understand that it's required, and that organizations often follow processes long after they're revealed to be foolish. But it's been a decade now since the housing bubble revealed that appraisals are meaningless. Why has no one eliminated them?

Because they reasons they were required were still valid, so instead efforts were directed at the factors that made them ineffective at addressing the need motivating them.

Whether those efforts were successful or not is another discussion.

Re: How Bad Are Zillow “Zestimates”?

#188

Post by gozur88 »

irishcoffee wrote: post #166
kelukelugames wrote: post #74

Earlier quoted context omitted.

This is correct. I used to work at Redfin and estimates are a sore point for homeowners. It's one large pissing contest for their egos. Everyone has the same complaint, "Why isn't my home priced as high as that one?!?"

I'm the other guy. I bought my house for 260k a year ago, redfin now lists it at 330k, and there is just no possible way that is correct.

I'm in the same boat as you. The Zillow estimate in my neighborhood seem to be about 15% higher than the sale price on any particular property. It's kind of academic for me, since I don't plan on selling any time soon, but it would be a mistake to do financial planning based on those estimates.

The funny thing is the estimate doesn't change when a sale closes. I would think the surest indication of what you can get for a property is what it sold for last week.

Re: How Bad Are Zillow “Zestimates”?

#189

Post by r00fus »

jungrothmorton wrote: post #184
yoloswagins wrote: post #183

Earlier quoted context omitted.

Which house canary product does free home valuations?

We have free trials of our valuation product, Value Report: https://www.housecanary.com/product-value-report

When do you plan to add support for multi-units? I have a duplex...

Re: How Bad Are Zillow “Zestimates”?

#190

Post by tomohawk »

wheelerwj wrote: post #125
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…

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.…

The separation part only sounds good. However, if you get an incompetent appraiser, there's literally nothing you can do about it. It's also hard to weed out the incompetent ones, as they are now independent from their customers. We got an incompetent on our last deal. Couldn't find the house. Misidentified the street. Couldn't find the electric panel. I could go on. Took several weeks to get the appraisal done, and there was nothing we could do about it because independent.
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