Intro to Zillow Zestimates

[Zillow-Search-Box-Cliff]

Zillow Stats

General Stats

  • Traffic– A record breaking 10.7 million unique users visited Zillow in April 2010.
  • Engagement– Nearly two million homeowners have claimed their homes on Zillow and 19 million homes have edited home facts.
  • Proliferation– Over 72 million U.S. homes have been viewed on Zillow: that’s 75% of all homes in the country. In some cities, more than 90% of all homes that exist have been viewed on Zillow– San Francisco, Los Angeles, Boston and Seattle.
  • Users– 90% of Zillow users own a home, and two-thirds are either actively buying or selling, or plan to within 12-24 months.
  • Zillow Mobile– Combined, the Zillow iPhone App and Zillow on iPad have more than 1,100,000 downloads from iTunes – making each the #1 real estate app on their respective platforms. The Zillow Android App has been downloaded more than 200,000 times since its launch in March 2010.

Zillow Mortgage Marketplace

  • Average Loan Requests/ Day: 1,600
  • Total Number of Loan Quotes: More than 13 million loan quotes have been submitted since Zillow Mortgage Marketplace launched in April 2008.

Last updated May 2010.

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Zillow provides some great features, some of which were mentioned above in Zillow’s stats:

One of the most popular (and most disputed) features is the Zillow Zestimate® (pronounced as one word; not called a “Z” estimate). Zestimates are great because they are convenient. Zestimates are terrible because they are convenient and therefore easy to rely on or default to as the reliable source of the true value of a property. If you’re a buyer and a house is listed for $150,000 and the Zestimate is $172,500, you might instantly think, “What a great deal. I want to consider buying that house.” If you’re a seller and you have your property listed for $150,000 and the Zestimate is $127,500, you might get frustrated with Zillow for having such a low number. Keep in mind the difference between these example Zestimates is $45,000, or a variance range of 15% from $150,000. You’ll see why this $45,000 (15% variance) example is important after reading the next section.

Let me share a few facts about Zillow’s Zestimate feature:

  • Zestimates are great in that they are easy, no-thought-required estimates.
  • They are not maintained manually. They are the result of calculations (i.e. a formula), based on data inputs. Not to get too technical but each attribute of a property affects the outcome of the formula. Thus, if the data in the formula is wrong, the output (i.e. Zestimate) will not be as accurate as it could be.
  • There are many factors that go into the Zestimate formula, including local trends. Let’s say you claim your home on Zillow and there is some data missing (e.g. showing NULL/blank/0 bedrooms) and you edit your home’s information, attempting to improve your Zestimate value by improving the inputs to the Zestimate calculation. Once you give all the correct specs, your Zestimate may be lower than you would have hoped if your locale is under pressure (i.e. not a hot or stable market).
  • A Zestimate is not a crystal ball–it does not tell you what a house WILL sell for in the current market. It is termed “Zestimate”, with 8 of 9 letters conveying estimate.
  • If you are a homeowner, you should make sure Zillow has all your house information correct. It will help Zillow provide a more accurate Zestimate and improve Zillow’s accuracy ratings. Also, you can track your Zestimate history over time if you’re just curious or might consider selling in the mid- to long-term.
  • For those who like to look at the numbers, check out Zillow’s own accuracy metrics here:
  • These are the Zestimate accuracy details for Tulsa County:
    • Last updated: March 10, 2010. Note: Zestimate accuracy is computed by comparing the final sale price to the Zestimate on or before the sale date. The data herein is computed for the three-month period ending December 31, 2009.
    • Tulsa has a Zestimate Star Rating of 4 stars (the highest), which means there is plenty of data for Zillow to feel comfortable providing Zestimates in this area of the country. In my opinion, areas of the country with 4 stars should have the most accurate Zestimates.
    • 99% of Tulsa Homes on Zillow
      • This indicates the percentage of homes for which we have data (e.g., number of bedrooms or bathrooms) in a particular locale. These are the homes you can find via maps or search on Zillow.com.
    • 99% of Tulsa Homes with Zestimates
      • We can only calculate Zestimates for homes where we have certain data, including transactions. This column indicates the percentage of homes in an area with Zestimates.
    • 36% of Tulsa Zestimates Within 5% of Sale Price
      • This is the percentage of transactions in a location for which the Zestimate was within 5% of the transaction price.
    • 58% of Tulsa Zestimates Within 10% of Sale Price
      • This is the percentage of transactions in a location for which the Zestimate was within 10% of the transaction price.
    • 79% of Tulsa Zestimates Within 20% of Sale Price
      • This is the percentage of transactions in a location for which the Zestimate was within 20% of the transaction price.
    • 7.8% Median Error for Tulsa Zestimates compared to Tulsa sales
      • Half of the Zestimates in an area were closer than the error percentage and half were farther off.
      • For Tulsa County, Zestimates for half of the homes are within 7.8% of the selling price, and half are off by more than 7.8%.

You can also view Zillow’s YouTube channel video “A Guide to the Zestimate for Real Estate Professionals” for more information, where they state the Zestimate is just “a starting point” and they recommend you talk with a real estate professional. This is the video’s closing quote: “But again, at the end of the day, before any major financial decision is made, while the Zestimate’s fun to kind of get an idea, you should really consult a professional before making any type of financial commitment” (emphasis added).

Cliff’s Summary: Zillow has LOTS of data for the Tulsa area–99% of homes. Zestimates are estimates and Zillow’s own metrics reveal that some homes sell for more and some for less. Around 1/3 of homes sell within 5% of the Zestimate (example: if the Zestimate before a sale is $200,000, sales between $190,000 and $210,000 would count in the 5% range–a $20,000 range). Around 80% of homes sell within a 20% range ($160,000 – $240,000 on a $200,000 Zestimate–an $80,000 range). This means around 20% of houses don’t sell within this $80,000 price range on our $200,000 house example. Personally, I would like to have an easy, no-brainer number to look at but after analyzing the accuracy of the numbers in the Tulsa area, a good ol’ manual Comparative Market Analysis (CMA) by an agent is the way to go when truly considering a buy price or list price on a house. Contact End Zone Realty if you want one for yourself!

5 Responses to "Intro to Zillow Zestimates"
  1. Francie Bomer says:

    Hi Cliff – right on! You said it well. Thanks for helping to educate people on this topic! Cheers, Francie

  2. Bob Haywood says:

    Cliff, good analysis of Zillow and their Zestimates. The public tends to “like” Zillow while the Real Estate community at large very much and overwhelmingly “dislikes” Zestimates due to them being so inaccurate. Further, Zillow now is asking Real Estate agents and public to provide correct data for them, while at the same time, charging agents to be listed alongside their own listings. There is a large backlash due to this and many are choosing not to participate. One other experienced by many is inaccurate listing data. Very often we find that our listings have missing or completely wrong data. We often have to correct the public’s misconceptions when giving them information about listings.

    Good analysis! Keep up the good work.

  3. Susie Tatum Woody says:

    Cliff – thanks for taking the time for write the comments – so much to keep sharing w buyers and sellers. thanks, Susie

  4. Here’s another great article from Realtor.org: “Did You Know: Zillow Home Price Estimates” March 31, 2010 By Selma Lewis, Research Economist — http://www.realtor.org/research/economists_outlook/didyouknow/dyk033110sl

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