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Posted by on Jul 7, 2011 in Market Conditions, Thinking of Buying?, Thinking of Selling?, Tips, Advice & Links, Zillow | 22 comments | Print Print

Zillow Revisions

2016-02-20 08.40.22

This is pertinent because I’m working on a Zillow add-on for the blog.  Is Zillow relevant?  It’s a starting point for most areas, but in pure tract-home neighborhoods they should be fairly accurate by now.  Will sellers listen?

Hat tip to SM for sending this along, from the

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.


The explanation came that same day, when the real-estate website sent out a press release saying it had modified the formula it uses to estimate the value of some 97.3 million American homes, known as the Zestimate, to expand the coverage of its database of homes and improve accuracy. The company had added 25 million new Zestimates, incorporated user-submitted data about improvements and gave greater weight to more recent sales data.

For some, the value of their home went up. Others saw dramatic decreases. Overall, Zillow says, most adjustments in valuation were of 10% or less, and the overall margin of error for Zestimates dropped from 12% to 8.5%, not far off the typical 5% margin of error that most home appraisers claim.

Zillow says that slightly more Zestimates went down than went up, but declined to provide more specific information about exactly how many home valuations went one way or the other. The company also said that there was little variation by region, except that in some markets, Zestimates were made “more accurate” by the revision than others. In Denver, for example, the margin of error for home-value estimates went from 12.2% to 5.5%, meaning that Zestimates there are 55% more accurate than they were before, Zillow says.

Some markets with more volatile housing markets and lots of homes changing hands in distressed-sale situations, saw more dramatic shifts, Zillow says. This is because the new algorithm for calculating Zestimates gives more weight than before to recent home sales, as a way of catching up with the most current local housing market conditions.

Mr. Trumbo, of Phoenix (where Zestimates were made 47% more accurate, according to Zillow), actually got both sides of the stick. His primary residence in Phoenix dropped in Zestimate value from $489,000 to $396,900, but a townhouse he owns as an investment property in San Francisco actually rose in value, from $670,000 to $737,600.

Still, his personal “net worth” statement, which incorporates the value of his house based on Zillow’s estimates, showed that he was $40,000 poorer than he had been a week before. He 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.

“These changes have already affected pending financial decisions, but it’s really hard to predict the effect of adjusting the net worth of millions of Americans, by billions of dollars!” he wrote in one letter. “Consider the family that used Zillow when deciding on a home purchase two years ago. After paying their mortgage for two years, thinking they were ahead of the game, today they discover that they paid $50,000 too much for the home and were underwater on day one.”

Bill Garber, a spokesman for the Appraisal Institute, the main trade group for U.S. property appraisers, said that Zestimates, like most automated valuation models, or AVMs, are not used by appraisers as a benchmark because they are based on public information and information from local multiple-listing services that is often inaccurate.

“Zestimates are a form of AVM … 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,” Mr. Garber wrote in an email. “Some AVMs are now intermixing MLS information, which is also filled with incorrect information. Garbage in, garbage out.”

Of course, the Appraisal Institute does have a dog in the fight — its members earn their keep by having homeowners or real estate agents pay them to do thorough appraisals of individual properties.

Zillow is not an appraiser, and has maintained all along that the Zestimate is purely a “starting point” for determining the value of one’s home, and not an appraisal meant for commercial use. In an interview, Zillow chief economist Stan Humphries emphasized that the company has “never advised that [the Zestimate] be used as a standalone appraisal,” and argued that the adjustment of home prices is “actually good for consumers” because Zillow’s algorithm for determining home values is now more accurate.

In a statement, Zillow added: “In fact, when a consumer has decided to buy, sell or refinance a home, we always recommend they contact a local professional like an appraiser or a real estate agent. Additionally, we have the only automated valuation model that allows homeowners and their real estate agents to update home facts, like number of bedrooms and bathrooms and square footage.”

Still, Mr. Trumbo is not alone in being upset. One Zillow user, in a forum on the company’s website, wondered, “why did our home drop $300,000 in one year?”

One can see why the homeowners who lost Zestimate value might be upset. The website’s brand has become entrenched, used by real estate voyeurs and homeowners alike. Other websites, such as Trulia and Redin, provide estimates of a house’s worth based on comparable nearby sales and tax assessments, but none claim to have such a sophisticated formula for calculating a home’s worth. And, of course, there’s that catchy name—“Zestimate.”

A question remains, though: If Zillow’s new formula is truly more accurate, and if that means that some people, like Bill Trumbo, see their home values fall even lower, can homeowners handle the truth?


  1. From 3/1/11 to 4/1/11 my place went up 75k; from 4/1/11 to 5/1/11 it went up another 28k; then from 5/1/11 to 6/1/11 it dropped 67k. I agree that zestimates are not appraisals, but they do have a significant impact on the mentality of buyers and sellers and can really jade one’s sense of realistic pricing.

  2. I would argue that appraisals are no more accurate than Zillow. I’ve had 2 appraisals done within 2 months of each other (for refinancing) that used the same comparable neighboring house. The adjusted value based on that same comparable was different by over 10% between the 2 appraisals.

  3. Long time lurker on the site – love the videos. Anyhow, as Jim mentioned Zillow only really works in tract home neighborhoods. A house three doors down from my just closed for $1.05 million…Zillow estimate was $510K. This is a bit unusual because the sq footage was a bit off on Zillow compared to the MLS, but the point is made.

  4. what is absolutely mind boggling is that someone who claim to have worked as a financial analyst would actually use the zestimate at face value as part of his overall financial net worth. I pity anyone who actually ever used this guy’s financial services.

    and to actually be upset enough to write a letter of complaint and get in touch with the WSJ? wow.

    do we not see how ridiculous this is?

    I personally love zillow. it is a wealth of info. the zestimate is just a number. how accurate has it been with my home? pretty decent actually. did I get started on an anti-depressant pill when my house value went down by $300k over a year and a half? no, because I knew it never was worth that much. did I throw a party when it moved my value up by $100k with the most recent revempting? not at all.

    I’m sorry, but Mr. Trumbo really need to get a life.

  5. I checked Zillow when I bought my home last November. The value was nearly $38K less than I bought it for. I just checked again since JtR brought up the subject here, and it magically gained $38K.

    The new Zillow value doesn’t make me sleep any better than last November. I sleep well every night–for the simple fact that I love my house.

    But I have to admit, I find Zillow fun. I remember hearing a story on Zillow the weekend it launched years ago. It has a lot of info but I base the real value of my home with the comps in the general neighborhood where I live.

  6. Those that would put their guiding faith in Zillow are apt to be the ones shopping for “price per square foot” – overlooking a more important, albeit unquantifiable,metric: quality of life.

    I’ve lived in four different homes here in SD county since 1983. Each has been supremely satisfying in its own way. Not once was the notion of price-per-sq/ft considered. Curiously, one could step outside and see palm trees at each location. Just sayin’.

  7. In my area, Zillow used to significantly overvalue properties (like 20%)

    In the past year or two the valuations have gotten much more accurate although I’d say they are still a tad high (like 5%).

  8. Zillow (and most of the other AVM’s) is a joke. In the Phoenix market, Zillow consistently overvalues my rentals by 10 to 20 percent. In the Bay Area, my house can vary in value by 5 to 10 percent every month, without a single sale in the subdivision.

    The valuation model clearly does not distinguish between school districts or even cities. For example, their comps for a house in Tempe are across the freeway in Mesa. Different cities, different school districts, different ages, and the Mesa properties are in a planned community with a homeowner’s association.

    They are a little better with rents in the Phoenix market. Usually they are within 5 to 10 percent of market. 10 percent too high, and your house does not rent. 10 percent too low, and you are out some net income. A few minutes on the MLS and three or four of the bigger property management company websites gives you the right information.

    Zillow is fun to play with and it can give you some basic info. The overhead and street views are easy to use from the site. You can correct a lot of errors and add info for a house you own. That’s important because most people don’t understand how inaccurate Zillow is and they may use the info to make decisions. However, I would never rely on Zillow to make any investment decision.

  9. Most realtors are no better than appraisers at estimating value, that’s why Zillow exists.

    Most sellers gravitate to the highest number they can find, and it’s usually based on their calculating from realtor mailers and adding 10-20% because theirs is always better. Then they hire the agent who is willing to take it at their price.

    If Zillow’s zestimate is higher, then they’ll take that price too. Greed runs this country.

  10. Zillow is a bad joke. Always has been. How can an algorithm look at the condition of a house vs. the comps? It can’t.

    Example: My house is valued more than the identical house across the street, who has put on an addition and has travertine throughout. Why? I “claimed” my house. They didn’t.

    Example 2: My daughter’s house is in a starter neighborhood of single family homes. When Zillow did their adjustment, the value cratered over 10%. Why? Most of the sales are original owner sales or foreclosures that were stripped out. The “normal sales” of like homes are at a higher price than the “zestimate” if they are updated. None of that is taken into consideration.

    Third: House next to me had a zestimate of $850K. Oh.. it sold for $949K. Ooops.

    Zillow, to me, is useful for nothing more than entertainment purposes. How anyone can put any credence in that site is beyond me.

  11. But what if Zillow is correct in their estimates? Not many are saying RE is screaming higher anytime soon, and its not pc to say its going lower. Really, what if they’re right or at least somewhat right?

  12. Zillow is the ONLY semi legit website that actually has a logarithms for valuation and even then they call it a “zestimate”. Thus, makes sense as a starting point for either buying or selling, INCLUDING agents I would presume.
    So unless another website (there are a few) really has a more accurate logarithm that competes with the wealth of info that zillow does, it will be the status quo for a while.

    Anyone taking zillow too seriously needs to get a life, really. Its a great starting point for a buyer or seller, but if you dont care about doing either, its more trivial fun than anything else to watch the values go up and down.

  13. I’ve always thought that Redfin’s estimate based on sold comps was more accurate than Zillow. Even then, you have to manually adjust for condition and upgrades, errors in public records, and ultra-local defects (that is, a house right next door to a freeway or railroad tracks will sell for less than an identical one four houses down).

  14. My wife and I treat Zillow as “for entertainment purposes only”. It’s always nice to see the Zestimate of our house go up, though. This recent adjustment hit us pretty hard.

  15. I find Zillow the most useful for getting a feel for ballpark values, trends/graphs in a neighborhood. I never assume it to be accurate on any one specific property.

  16. Jim!!! Please tell me you are not going to use Zillow as part of your blog. As it stands now your blog is intelligent. You want to lose credibility? Zillow is awful and in fact is a Realtor’s enemy in my book.

  17. If I were Zillow I would show exactly how the number is calculated.

    A lot of the complaining would go away if people can see where the number comes from. As it is, it’s totally a black box, less useful because you don’t know where the number comes from, and the wild swings doesn’t help the credibility.

  18. I guess Zillow is way more incompetent than the people who purchased real estate between 2005 and 2007. Pricing is not an exact science, however, the average buyer will more often than not buy into a bubble mania. This has been verified time and time again as far back as tulips. These average buyers pissed away trillions of dollars during the bubble with the help of a variety of crooks at all levels. We might wish to concentrate our focus on what happened to that money and who benefited rather than on a 5% move today.

  19. Thanks Jake, for a good summary of the debacle.

    The blogs have been ablaze for years about how we got here, but few have solutions for the future – other than stand on the sidelines and complain.

    This blog has participated in the search-and-point-and-criticize hunt, but the government interference and banks’ can-kicking seems like it’ll continue forever.

    I’m gently trying to re-purpose this blog to be a helpful guide for those who are tired of waiting, and wish to buy or sell now and want quality help.

    People are welcome to join in the discussion, with rants and whines allowed. But ultimately I’m going to keep pointing the ship towards buyers and sellers.

  20. For ID sake, Jaboney above is a realtor from Daytona Beach.

    I don’t use Zillow for any day-to-day use, but I pay money now to be a Premier Agent – though I’ve complained about them before here.

    Why? They have the eyeballs, and I’m going to go where the consumer is.

    I think Zillow is a perfect match for me. It gives a data-hungry audience something to explore but leaves more questions than answers. A doubting consumer keeps searching for the truth, and there aren’t many other blogs or websites for them to find it.

    My specific use of Zillow is based in them being one of the only websites (Trulia being the other main one) that offers up their data for easy use.

    Bubbleinfo hopes to offer the ability for you the reader to enjter an address and in one click be linked to either my MLS search, or to zillow.

    I wanted to include, Redfin, and sdlookup, but they don’t allow their data to be accessed easily.

    I’m also looking at a separate custom mobile app too, so in the next couple of weeks I might roll out both.

    This is the Land of Qualcomm, and I need to stay ahead of the posse with these mobile devices. Kids to Grandparents are all using them as their primary connection to the world – and I want to help them with their real estate needs.

  21. Zillow, like it or not, strikes out at each and everyone of us whom are homeowners as it sets a publicly viewed value on our personal property investment. Reality check

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