Zestimate change causes wailing, hand-wringing

Remember the hubbub a few weeks ago when NAR revised some of its home-sales data? It’s happening again — but this time it’s Zillow on the receiving end.

And people are not happy about the changes.

Quoth the Wall Street Journal story:

On June 14th, Bill Trumbo, a 68-year-old retired financial analyst in Phoenix, Ariz., logged onto his bank’s online personal financial management account and found that his house in Phoenix had lost nearly $100,000 in value overnight.

Oh noes!

Let’s be real. His house didn’t lose “nearly $100,000 in value.” The “Zestimate” for his house did, and that only has a tenuous connection to reality. (All right, maybe that was a bit harsh. But using Zillow’s estimate as the actual value of your home is like using a Oujia Board to name your child.)

So what happened?

Zillow changed its formula for creating those “Zestimates.” Oh-oh.

Good: Now it gives more weight to recent sales. Bad: It still relies on user-submitted data about improvements. Silly: People still think those figures represent reality.

Bill Trumbo (from the Journal story) saw one of his homes’ Zestimates drop $92,100, while another rose by $67,600. As a result, Trumbo believed his personal net worth dropped, and “[h]e dashed off letters to Zillow’s CEO, as well as to the CEO of his bank, Wells Fargo, explaining that Zillow’s change had caused him to lose $40,000 in paper net worth.”

How would someone respond to such a letter? (“This vague estimating tool says I’m not worth as much!”) Perhaps by explaining that no serious financial institution would rely on a “Zestimate” for anything other than… well, not at all, actually.

Reality kicks in around paragraph 10 of the story, which quotes Appraisal Institute spokesman Bill Garber, who explains that Zestimates are just a kind of automated value model:

AVMs have limitations, the biggest being the lack of inspection and oversight of any improvements. Complex markets render them nearly useless. They’re basically an aggregation of public records data, and public records are riddled with errors.”

And my favorite line of his, which sums it all up: “Garbage in, garbage out.”

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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One Response to Zestimate change causes wailing, hand-wringing

  1. Wes Atiyeh says:

    We always wondered if real estate on the internet would ever put a dent or put real estate agents out of business. Well after about 10+ years of all this we can honestly say the real estate agent is more important now then ever.

    Zillows “Zestimates” calculation is a 2D calc in a 4D world. The good part is that they will have a hard time achieving the 4D cause they just don’t get “it”. SP/FSF=PSF, then multiple that PSF with the SF of your home and you have your Zestimate. A BS number that has no significant value at all.

    So the next time you want a Zestimate get an CMA by your local REALTOR and they will have a better handle on what the true market value of your home is worth 10 out of 10 times.

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