Profile picture for Hank71

How does zillow's appraisal formaula account for market flux by location?

  • May 28 2009 - Springfield
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Answers (2)

  • May 29 2009
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Profile picture for Blue Nile
Zillow doesn't do "appraisals" they do "estimates" based on the "least squares curve fit" method, also known as "linear regression".  To get a better understanding of how this works, if you have Excel on your computer, look up the LINEST function in the help file (F1 key), and look especially at example #3 "multiple linear regression".

The data used is from public county records, and recent sales, provided by 3rd party sources.  As the curve fits use all available public records data with all local sales, they are by nature tracking values for the local area, not some other area.

Still, the error margin is usually about +/-15% due to 1) lack of sufficient recent sales, 2) specific items affecting values that aren't reflected in county public records data, and 3) market idiosyncracies that cause a percentage of sales to not match the trends.  (Zillow tries to filter some of those out.  But unless it is way out of line, it is hard to know if a sale is a "special case").

The Z-index trends for an area (neighborhood, zip code, city, county, state...) are actually more useful as the random fluxuations and random estimating errors tend to average out.  The Z-index is a "median" value meaning 1/2 the ownership residential units have higher value, and 1/2 the ownership residential units have lower value.  Zillow uses a Z-estimate for EVERY ownership residential unit to calculated the median, unlike realtors that tend to only base their median on the properties that recently sold.
  • May 28 2009
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