Finally there is an article that exposes their inaccuracy, but it doesn’t mention the negative effect on buyers due to the zestimates being adjusted to within a couple of bucks of the list price once a home goes on the market.
But the author does highlight that the zestimates are more than 10% wrong for about a third of all homes!
An excerpt:
By definition, half of homes sell within the median error rate, e.g., within 2.4% of the Zestimate in either direction for on-market homes. But the other half don’t, and Zillow doesn’t offer many details on how bad those misses are. And while the Zestimate is appealing because it attempts to measure what a house is worth even when it’s not for sale, it becomes much more accurate when a house actually hits the market. That’s because it’s leaning on actual humans, not computers, to do a lot of the grunt work.
When somebody lists their house for sale, the Zestimate will adjust to include all the new seller-provided info: new photos, details on recent renovations, and, most importantly, the list price.
The Zestimate keeps adjusting until the house actually sells. At that point, the difference between the sale price and the latest Zestimate is used to calculate the on-market error rate, which, again, is pretty good: In Austin, for instance, a little more than 94% of on-market homes end up selling for within 10% of the last Zestimate before the deal goes through.
But Zillow also keeps a second Zestimate humming in the background, one that never sees the light of day. This version doesn’t factor in the list price — it’s carrying on as if the house never went up for sale at all. Instead, it’s used to calculate the “off-market” error rate. When the house sells, the difference between the final price and this shadow algorithm reveals an error rate that’s much less satisfactory: In Austin, only about 66% of these “off-market Zestimates” come within 10% of the actual sale price. In Atlanta, it’s 65%; Chicago, 58%; Nashville, 63%; Seattle, 69%. At today’s median home price of $420,000, a 10% error would mean a difference of more than $40,000.
Read full article here:
Perhaps the Zildoes being “wrong” isn’t the word. “Manipulated” and “self-engrandizing” work better.
If you had the power to project home price estimates that ultimately benefit you wouldn’t you use that power?