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Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

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Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#181

Post by DougWebb »

WaxProlix wrote: post #148
djrogers wrote: post #143

Earlier quoted context omitted.

The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US. The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.

Even without revealing the highest offer, the offers themselves constitute a silent auction, which is where a lot of the information asymmetry comes from. If I could speak to each of the other people and tell them I had X amount to spend we could all agree to walk away or make offers without going through a bunch of hassle and (for 32 of 33 offerers) heartbreak. The process really highlights to me how broken certain…

Why would the seller go along with the idea that the buyers would negotiate amongst themselves to choose a price?

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#182

Post by carbocation »

cmurphycode wrote: post #175
strictnein wrote: post #19

The Zillow estimate used to be spot on in our neighborhood, for several years even. Recently they all plunged to 10-20% below market value, even though all sales data puts it at the previous mark. The weird thing is that they also went back and recalculated old "Zestimate" data as well. On April 2nd the estimate for our house was $617,453, which is more or less what it would sell for. It had been above $600k since Ju…

I know it seems weird to have the "old" data change. But, it's not observed data, it's estimates made at a point in time. The estimate comes from the property itself as well as the algorithm. If they changed the algorithm, do you think it would be better to recalculate the old values, or show a huge swing in your home value, implying some sort of market trend or issue with your house? If I were implementing it, I thi…

I used to run an online service predicting college admissions. As I would update the algorithms to incorporate new results, users' predictions would change. At first, I thought people would be pleased. Soon, I discovered that people really don't like the idea of their prediction changing when they have done nothing to cause it to change. Subsequently, I would lock in the values that had been "seen" by the user, and allow them to update their prediction, if they wanted to, when new models came online. This eased a lot of the users' expressed frustration.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#183

Post by sidlls »

stupidhn wrote: post #180
sidlls wrote: post #81

Earlier quoted context omitted.

Real estate markets are rarely liquid. Such models would have to take that into account, of course, and that isn't something I'd think is straightforward at all.

> Such models would have to take that into account I believe the liquidity of the asset is inherently taken into account in the price at which the exchange is made.

Why do you believe that, out of curiosity?

The reason I think it isn't straightforward to account for is based on several things: it isn't fungible, the purchase date can have little or no relationship to the price, and the means of purchase typically carry other time-based constraints that are also not necessarily related to price (although they can be). Furthermore, the liquidity in a given market may change fairly quickly and without any (apparent) other reason.

I haven't tried to develop a model for this, so this is just sort of a gut feel for how difficult feature engineering to account for how a market behaves in this respect might be. And that "gut feel" is mainly informed by my experience purchasing and selling property (for personal and rental use).

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#184

Post by csours »

Yen wrote: post #163
_m8fo wrote: post #16

You would think real estate would prove to be one of the few real life fields where machine learning would be able to predict the prices pretty accurately. You have: 1. List price 2. "Favorites" on the MLS. 3. Square footage 4. Bedrooms 5. Bathrooms 6. Sold price for nearby properties 7. Sold price for nearby properties relative to their list price And the list goes on... Is it that difficult to predict? Literally th…

Disclaimer: I'm a former employee of Zillow Group, and still hold stock. These online real estate listing sites are using machine learning to try and predict sale price. The main difficulties are: 1. 'Machine Learning' is a broad term, with lots of potential approaches, some of which could give more or less accuracy. 2. If you put too much effort into getting the prediction accurate, you're prone to overfitting. 2. T…

Was the model aware of it's own error rate? For instance, could you say that this home is worth $500-650 thousand dollars?

Obviously, this is harder to convey to a homebuyer and for various reasons "hard" numbers are prefered, not least because they cause the illusion that you know what you are talking about.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#185

Post by [deleted] »

Yen wrote: post #163
_m8fo wrote: post #16

You would think real estate would prove to be one of the few real life fields where machine learning would be able to predict the prices pretty accurately. You have: 1. List price 2. "Favorites" on the MLS. 3. Square footage 4. Bedrooms 5. Bathrooms 6. Sold price for nearby properties 7. Sold price for nearby properties relative to their list price And the list goes on... Is it that difficult to predict? Literally th…

Disclaimer: I'm a former employee of Zillow Group, and still hold stock. These online real estate listing sites are using machine learning to try and predict sale price. The main difficulties are: 1. 'Machine Learning' is a broad term, with lots of potential approaches, some of which could give more or less accuracy. 2. If you put too much effort into getting the prediction accurate, you're prone to overfitting. 2. T…

[deleted]

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#186

Post by devoply »

cmurphycode wrote: post #175
strictnein wrote: post #19

The Zillow estimate used to be spot on in our neighborhood, for several years even. Recently they all plunged to 10-20% below market value, even though all sales data puts it at the previous mark. The weird thing is that they also went back and recalculated old "Zestimate" data as well. On April 2nd the estimate for our house was $617,453, which is more or less what it would sell for. It had been above $600k since Ju…

I know it seems weird to have the "old" data change. But, it's not observed data, it's estimates made at a point in time. The estimate comes from the property itself as well as the algorithm. If they changed the algorithm, do you think it would be better to recalculate the old values, or show a huge swing in your home value, implying some sort of market trend or issue with your house? If I were implementing it, I thi…

They should be more transparent about their algo though. That would then allow users to actually know how they came to the conclusion that they did. Hopefully this lawsuit will reveal that algo.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#188

Post by mattmcknight »

strictnein wrote: post #19

The Zillow estimate used to be spot on in our neighborhood, for several years even. Recently they all plunged to 10-20% below market value, even though all sales data puts it at the previous mark. The weird thing is that they also went back and recalculated old "Zestimate" data as well. On April 2nd the estimate for our house was $617,453, which is more or less what it would sell for. It had been above $600k since Ju…

It's a rough estimate, but it is not always lower. A place near me was listed for $625k below the Zestimate, and is selling for 725k below the Zestimate (which was $2.4M). A below market rate sale in your area, such as a foreclosure auction, can drive automated price estimates down. A transfer of ownership to a trust, which can be at an old sale price or even zero dollar, is tough to discern in the metadata of some localities and will drive the $/sqft down.

Given the many wild overestimates, I don't suspect that they are trying to have their model dampen price estimates to drive referrals. However, the price estimates at Redfin seem much more accurate, so their model could use some work.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#189

Post by [deleted] »

tehlike wrote: post #103
hehheh wrote: post #38

Earlier quoted context omitted.

There's plenty of money in it. Imagine if you could price the house correctly out of the gate, reducing the amount of time the home stays on the market. It is indeed a hard problem to solve using ML. You'd need a few other things: 8. Floor count 9. Size and location of the bedrooms, bathrooms, kitchen 10. In-unit laundry (mostly for condos) 11. Proximity to neighbors 12. Existing tree coverage and other landscaping 1…

Opendoor does exactly this?

[deleted]

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#190

Post by encoderer »

BeetleB wrote: post #43
_m8fo wrote: post #16

You would think real estate would prove to be one of the few real life fields where machine learning would be able to predict the prices pretty accurately. You have: 1. List price 2. "Favorites" on the MLS. 3. Square footage 4. Bedrooms 5. Bathrooms 6. Sold price for nearby properties 7. Sold price for nearby properties relative to their list price And the list goes on... Is it that difficult to predict? Literally th…

>And the list goes on... Is it that difficult to predict? They do likely have a ML algorithm in the background. They even offer an Excel sheet where, for any county, you can see what % of sold homes are within, say, 20% or 10% of the Zestimate (it can be quite bad). And 20% is a huge error. Even 10% off is huge for most people. What is hard to capture: 1. Condition of the house 2. Design of the house 3. Color of the…

You think estimating the value of every home in the country within 10% is bad?

Lots of criticism of zestimate but I'm curious: is anybody doing AVM better and for free?

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