How Bad Are Zillow “Zestimates”? • Hacker News Board

Re: How Bad Are Zillow “Zestimates”?

#131

Post by honkhonkpants » Mon, Dec 05, 2016, 7:02 PM UTC

EpicEng wrote: post #123

honkhonkpants wrote: post #112

Earlier quoted context omitted.

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.

What incentive does the lender have? The involved parties are the seller, the buyer, their agents, and the originator of the loan. All of these people are working to close the deal at the negotiated price. The originator of the loan will hold the loan for somewhere between 72 hours and 30 days, so they don't care.

Re: How Bad Are Zillow “Zestimates”?

#132

Post by Tempest1981 » Mon, Dec 05, 2016, 7:03 PM UTC

jedberg wrote: post #127

> 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 m…

I wonder if you could estimate the condition of the house based on a street-view picture of the outside. There is probably correlation between outside upkeep and interior condition.

Re: How Bad Are Zillow “Zestimates”?

#133

Post by toomuchtodo » Mon, Dec 05, 2016, 7:03 PM UTC

baus wrote: post #116

toomuchtodo wrote: post #27

Earlier quoted context omitted.

Comparables are what a Zestimate is without the BS "special sauce" that Zillow makes you think exists. Comparables are free, and based on existing property market data (typically sold similar properties looking back a certain period of time). https://www.biggerpockets.com/rei/real-estate-comps-house-va... Yet again the tech community believing a problem exists to be solved that has already been solved. > In most mark…

> In most markets comparables are acquired through an MLS database, and access to MLS is usually not free. I don't think appraisers can use MLS listings exclusively when valuing a property. The primary source is typically public records data.

They use both: http://www.corelogic.com/products/appraisersuite.aspx

Re: How Bad Are Zillow “Zestimates”?

#134

Post by ensignavenger » Mon, Dec 05, 2016, 7:06 PM UTC

EpicEng wrote: post #37

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.

If appraisals are not accurate, then what is the definition of 'accurate'? Appraisals are what the lender relies upon to verify the mortgage amount. I also highly doubt that number.

The article uses the actual sales price as the "accurate" number.

As with anything, the 'value' is what a willing and able seller and a willing a able buyer agrees to. An appraiser attempts to determine the most likely price for something (in this case a home) within reasonable amount of marketing time. The appraisal report will usually specify the expected marketing time. I think in most areas this will be 3-6 months, some areas longer and others shorter, depending on the market.

Of course, appraisals effect prices, because most buyers need to finance, and most financiers won't do it without an appraisal that is at least as much as the purchase amount. (That is the "able" part of the willing and able requirement).

Two appraisals performed on the same property at the same time can come back with very different numbers. I have bought two houses in the last 4 years- both had 2 appraisals done, and one the values were almost almost 17% different- a difference greater than most of the "errors" that the articles notes for Zestimate vs sale price. On the other house, the appraisals were came back with nearly identical values, but the first appraisal was done wrong. Still this value (the appraised value from both appraisals) was 16.2% higher than what I paid for the property.

My experiences are just as anecdotal as the articles, though. But I have spoken with real estate professionals all over the country that have the same experiences repeatedly with appraisals.

Re: How Bad Are Zillow “Zestimates”?

#135

Post by Tempest1981 » Mon, Dec 05, 2016, 7:11 PM UTC

teuobk wrote: post #71

exhilaration wrote: post #56

Earlier quoted context omitted.

It's worth it to create a login & enter in your upgrades, so your ZESTIMATE goes up. Very nice, thank you, my Zillow estimate is now $5965 higher. We have no intention to sell but if we do, at least I can start the negotiations at a higher price point by pointing to Zillow.

Incredible -- I just did the same, and my house's "zestimate" went up about $20,000. Of course, if I compare my house to actual sales in the neighborhood over the past few months, that's probably 10% high, so correcting Zillow's data about my house made the zestimate less accurate, not more.

Try changing the number of bedrooms. That used to have an effect, even for the same square footage. In one case, 2 bedrooms came out higher than 3.

Re: How Bad Are Zillow “Zestimates”?

#136

Post by intrasight » Mon, Dec 05, 2016, 7:11 PM UTC

zrail wrote: post #119

teuobk wrote: post #77

Earlier quoted context omitted.

Isn't it strange how the appraisal always seems to come in just a little above where it needs to be in order for the financing to be approved?

An appraisal is telling you what the market will bear for a particular property. What better indication of the market value than the most recent price agreed to?

You're missing the point. May appraisers are under the thumb of the mortgage brokers. See http://www.nakedcapitalism.com/2014/12/bill-black-mortgage-a...

[I]n 2007the New York State attorney general sued First American: relying on internal company documents, the complaint alleged the corporation improperly let Washington Mutual’s loan production staff ‘’hand-pick appraisers who bring in appraisal values high enough to permit WaMu’s loans to close, and improperly permit WaMu to pressure …. appraisers to change appraisal values that are too low to permit loans to close” [FCIC 2011: 92].

Re: How Bad Are Zillow “Zestimates”?

#137

Post by jedberg » Mon, Dec 05, 2016, 7:14 PM UTC

Tempest1981 wrote: post #132

jedberg wrote: post #127

> 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 m…

I wonder if you could estimate the condition of the house based on a street-view picture of the outside. There is probably correlation between outside upkeep and interior condition.

Maybe. Ours looked ok from the outside, was definitely worse on the inside.

Incidentally we bought it from the original owners who had owned for 55 years. I wonder if there is a correlation between condition and how long the current owner had it.

Re: How Bad Are Zillow “Zestimates”?

#138

Post by hoov » Mon, Dec 05, 2016, 7:16 PM UTC

I bought a house a year and a half ago; Zenstimates are consistently ridiculously low for my area. I was looking for single family homes in Somerville, MA. There is so little supply that every home goes immediately after listing and most likely with a bidding war. If you look at the Zenstimate for my property, it looks like I over-payed by almost 30%, but I guarantee I could flip for a profit tomorrow.

Re: How Bad Are Zillow “Zestimates”?

#139

Post by ahulak » Mon, Dec 05, 2016, 7:17 PM UTC

There are ~100M homes, ~3k counties, ~27k zipcodes, and ~300k neighborhoods and subdivisions that all have different market dynamics. A sample size of 9 make this analysis completely meaningless.

Equally important, is that the author of this article doesn't appear to know much about how the real estate data industry works (especially in regards to market trends and how they are used to generate the Automated Valuation Models (AVMs for short). A bit surprising given the nature of the business he is representing.

The Zestimate is one of a handful of Automated Valuation Models (AVMs in industry speak) - it's the only one with a consumer-facing brand, and as a result sees the most scrutiny despite the fact that the other AVMs on the market are the ones actually used by the banks during the appraisal process.

If you think the Zestimate is bad, you should see some of the other commercial AVMs.

The reality is that creating an automated valuation for the ~100M properties in the US is an incredibly difficult task given the availability of data (or lack thereof!). Zillow does a pretty darn good job and has a bit of a data advantage given its incredibly high coverage of for sale listings (though they lack the experience - some firms have been producting AVMs for decades!).

Another thing to note, is that AVMs (like any statistical model), usually aim for a sweet spot that covers as many homes as possible. As a result, ultra high-end properties are often incorrectly valued. E.g. that $25M mansion down the street will be very hard for the model to price. Additionally, certain luxury features, like say, a tennis court, are almost impossible to incorporate into these models on a national scale.

Re: How Bad Are Zillow “Zestimates”?

#140

Post by ensignavenger » Mon, Dec 05, 2016, 7:18 PM UTC

intrasight wrote: post #44

ensignavenger wrote: post #26

Earlier quoted context omitted.

The standard HUD uniform residential appraisal report requires a cost to build estimate. I have never seen one without that estimate completed. However, I bought a home last month which had 2 different appraisals done on it, and neither one had any weight given to the cost to build. (Despite the fact that the appraiser claims otherwise, I can mathematically prove that there was no weight given to that method.)

I can't imagine any scenario where cost to build would weight into appraisal.

If the appraisal is being used to determine appropriate insurance coverage or even an insurance pay out; or possibly a court ordered payout if someone else were to destroy a property; then it would likely be the primary weight.

But lenders generally don't care so much about the cost to build, so an appraisal ordered by a lender generally won't.

That being said, my recent appraisal (I was financing the purchase) said "All 3 approaches to value considered with most weight placed on sales comparison approach."

I could mathematically prove this statement false, as the cost to build had zero consideration on the value. I think it is mostly a canned statement. Maybe they have a different definition of the words "considered", and "most". :)