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In the Forum: Stan Humphries Chief Economist Zillow --Posts about Zestimates

Here are a Collection of Stan Humphries Chief Economist for Zillow Comments/Posts made about the Zestimate and links to the Threads where they were made
Stan Humphries Chief Economist of Zillow Explains Zestimates

Has anyone been successful in getting Zillow to correct a substantially incorrect Zestimate?

I'll be posting his comments as..comments so bear with me as I add them
  • April 21 2012 - US
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Answers (65)

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[Part 1]

Thanks for the thoughtful commentary here. I thought I'd wade in by first returning to the original issue about responding to feedback about Zestimates and changing individual Zestimate values.

What we desire to achieve with the Zestimate is that the models produce the same result given the same inputs (i.e., two identical houses right next door to each other, previously sold on the exact same date for the same price, and with the same tax assessment should get the same Zestimate) and that this result is as close to the actual sale price as possible. In some cases, however, this doesn't happen. Two identical homes may have different valuations or the valuations may be the same but they differ substantially from the real market value. These issues arise from defects in the overall algorithm or specific statistical models themselves (of which we create more than one million each time we create Zestimates three times each week), and it is these issues that we are constantly monitoring and attempting to fix through refinements in the algorithm and/or models.

In this case, the answer to the problem is not to manually adjust a Zestimate to align with, say, an appraisal. Rather, a Zestimate that is substantially off can signal for us a problem with the algorithm or in the statistical models for that particular area. In that case, our statisticians investigate with the aim of finding the glitch in the algorithm or model that created the issue. Adjusting individual Zestimates is problematic because of the scale and objectivity required to individually value over 100 million properties. There is also an issue of consistency and fairness implicated in a manual change to a Zestimate. It is one thing to have an algorithmic error that we will work to solve. It is entirely another thing, however, if all properties for which the homeowner has contacted Zillow have higher Zestimates than comparable properties owned by homeowners who have not contacted Zillow (not surprisingly, we get very few requests to lower the Zestimate).
  • April 21 2012
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[Part 2]

Any valuation methodology will produce a difference (error) between the valuation and an ultimate sale price. We publish that data here. At Zillow, we endeavor that this error be only algorithmic in nature (and thus something that we will ultimately be able to correct with more sophisticated approaches) and not be subject to the vagaries of who has and has not contacted Zillow.

In essence, with this approach, we are betting that Zestimates will get progressively more accurate over time and that there will be fewer inconsistencies between identical properties. We have put this belief into practice as demonstrated by the fact that we have developed three different valuation algorithms since Zillow's launch in 2006, each getting significantly more accurate than the previous one.

Does this mean that we don't want to hear about issues with individual Zestimates? Absolutely not. We appreciate feedback on individual Zestimates, because that helps us improve the model so that all Zestimates are more accurate. These individual examples give us clues that help us find algorithmic issues that affect many more homes, and it is these algorithmic issues that we want to fix. Unfortunately, fixing these more general issues takes more time than just adjusting an individual Zestimate to some value closer to the current homeowner's estimate of home value. Sometimes it may be difficult to fix this new issue without negatively affecting many more Zestimates. And sometimes the issue is so subtle that it simply requires time to find a good solution.

So please rest assured, we are listening when consumers give us feedback about their Zestimates. We monitor this feedback to help us identify systemic issues that need to be addressed. Unfortunately, given only a handful of statisticians, we are not able to provide a response to every single piece of feedback or immediately identify the root cause for any specific inconsistency. We are trying to achieve the greatest amount of good for the greatest number of users, and we believe that the best way to do so is to constantly be improving the core algorithms in such a way that the overall accuracy improves and inconsistencies are minimized.

[continued...]

  • April 21 2012
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[Part 3]

"As a final note, let me quickly address a few other issues that have come up on this thread:

On the accuracy of Zillow Zestimates: For 2011Q4, our median Zestimate error was 9.4% with 52.1% of sales in that quarter falling within 10% of the Zestimate. Since 2006 when we launched, our models have become substantially more accurate even while the overall market environment has become one in which pricing is more uncertain and volatile. We will continue to get more accurate. Information is better than no information in my mind, so I can't see the rationale for not having valuation information like the Zestimate. If we agree on that point, then the debate shifts to different sources of such information. I prefer lots of different sources. Accuracy conversations tend to become comparative in nature pretty quickly so I'd encourage Zestimate critics to be explicit about their preferred alternative valuation approach and its overall accuracy on a sufficiently large sample of sales."

  • April 21 2012
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"On whether Zestimates determine or simply track market prices: By design, Zestimate errors are generally symetrically distributed about zero meaning that there are just as many Zestimates that end up being above an ultimate sale price as those that end up being below the sale price. If Zestimates were, in fact, driving sale prices then it would be difficult to account for the fact that half of all buyers pay more for their house than the Zestimate.

On the suppression of individual Zestimates: I have to agree with hpvanc on this issue: Either Zestimates are useful or they are not. I personally believe a valuation of the accuracy we achieve is useful in a host of real estate decisions even though I value the additional input from a realtor or appraiser for certain of these decisions. If Zestimates are useful, then they are only useful if all are shown equally. They are considerably less useful if I'm only allowed to see the ones that are higher than the real market value."

  • April 21 2012
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On whether Zestimates determine or simply track market prices: By design, Zestimate errors are generally symetrically distributed about zero meaning that there are just as many Zestimates that end up being above an ultimate sale price as those that end up being below the sale price. If Zestimates were, in fact, driving sale prices then it would be difficult to account for the fact that half of all buyers pay more for their house than the Zestimate.

  • April 21 2012
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[off topic. Deleted by Zillow moderator.  Please see Good Neighbor Policy]
  • April 21 2012
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If you hadn't figure it out I was attempting to place his (Stan's comments) somewhere in one place so people could find them easily and read thru them easily...

Not provide you or anybody else with another Thread ..
If it's so important to you to take a potshot on every thread... then it's yours
Enjoy this Thread I now consider useless/dead & a waste of my time attempting to do..

Apologies to all who looked in expecting to find Stan's Comments
  • April 21 2012
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Another Attempt.....
Stan Humphries Chief Economist for Zillow Comments/Posts made about the Zestimate

"@ Surbiton"

"Thanks and I look forward to your thoughts. 
Regarding the "unsupportable perspective" of not deleting Zestimates, I suppose I think about that issue in the same context as other estimates people put on things having to do with me. Say, FICO scores or estimates of my car's value by Kelly Blue Book. 
Everybody has a FICO score. Some people probably don't agree with theirs. Many would probably like to suppress their FICO scores from ever being seen if they could. Since the score is an estimate, some people are probably better credit risks that implied by the score and some are probably worse risks. What also comes along with being an estimate is that decision-makers using the score (say, lenders) do exercise some discretion in applying the score because they know that the person with a 680 score might really be 700."
  • April 21 2012
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"There are also a variety of scores available from the different credit agencies, similar to different valuations such as the Zestimate, an appraisal and a CMA. Similar to Zestimates, credit agencies seek to make sure that the underlying facts that they feed into their models are correct (so if you weren't really delinquent on that student loan three years ago, they'll correct that fact) but they can't create a custom credit profile for an individual who feels that the FICO score that comes out of the model doesn't accurately reflect their real credit risk. They rely on the user of the FICO score such as a lender to make that discretionary determination based on the very real customer standing in front of them. Similarly, we trust buyers, sellers and agents to be able to use our estimate in a discretionary fashion as well, using it to ask more questions or seek other opinions of value (this is precisely what we mean when we say it's a "starting point"). But while users apply discretion when using any estimate (Zestimate, FICO, KBB car value estimate, property tax assessment, etc.), the estimate does have distinct value in the right context."
  • April 21 2012
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"At the risk of being accused of helping to bury my own post :-), I wanted to seek some clarification. I think I understood Surbiton's initial concerns and it was those concerns that I addressed initially in my post (if the information wasn't new, Tug, hopefully it was at least on point).

From the subsequent posts after I wrote, it seems that Tug might have a set of concerns that aren't the same as Surbiton's but I can't quite decipher what those concerns are from these posts here even though others on this thread seem to know quite well what his concerns are. Can somebody, ideally Tug himself, fill me in so I can try to address it? 
Thanks. "
  • April 21 2012
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"@blub"

"When you say "Zestimates can and many times do show errors," do you mean by "error" that the Zestimate does not equal the sale price on the day of an actual sale? That's a high bar as I'm sure you are aware, and one that few appraisals and CMAs will meet. Zestimates, appraisals, and CMAs will all have some error. We publish our accuracy rates religiously, and I'm happy to discuss our accuracy in the context of any accuracy metrics for the other two.

In what manner do you believe that Zillow should make clearer the "error factor, value range and overall concept of a Zestimate?"
  • April 21 2012
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"@Surbiton"

"Regarding the FICO analogy: I would view the analog of an annual credit report (where you see the facts about your credit record and current FICO score) to be a home details page on Zillow where one sees the facts about the home and the current Zestimate. You can access that data anytime on Zillow, not just once a year as in the FICO analogy. Yes, while one can correct factual errors on a credit report, one can also correct factual errors about a property on Zillow. One cannot, however, request a different FICO score if the credit facts haven't changed.

Regarding credit reporting regulations and whether they should be applied to Zestimates: Zestimates are not appraisals and cannot be used in lending decisions so regulations designed for such decisions don't seem applicable. Here, I'd probably invoke another of the examples that I provided earlier: car valuations by Kelly Blue Book. Should these be subject to regulations as well?"

  • April 21 2012
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"Regarding identical homes having different values: The reason that I provided the longish list of inputs that must be identical in order for a different result to be viewed as an error was to emphasize the fact that any differences in the inputs will generally produce a different result. Some people will expect that two neighboring homes with identical floorplans should have identical Zestimates even if the sale prices of the two homes are different (adjusted in time for when they were bought). The algorithm will infer different valuations based on the different sale prices with the logic that the differing sale prices reflect something intrinsically different about the homes not measured by the physical facts (e.g., perhaps one has nicer interior finishes, a better view, etc.).
It is exceedingly rare that truly identical homes (in all the inputs I described) have different valuations. If you have an example of such behavior, please post their addresses and we'll investigate. "
  • April 21 2012
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"@Surbiton"


"Regarding your home's Zestimate: Yes, I think I recall our team investigating this issue. If I recall, your home had the wrong city or neighborhood assigned to it (because of a boundary issue with our external geocoding service), but the geo-reference itself (i.e., latitude and longitude) was correct (i.e., it appeared in the correct location on the map). If so, then this issue would not produce a valuation issue. Note, I'm not saying that there is not a valuation issue (it is abundantly clear you believe there is), just that having the wrong city assignment is not the source of the error. Out of interest, is the zip code correct for your home?
Do you mean that Corelogic and Chase support the Zestimate or your estimate of value? If the former, have they been responsive to helping to address the error that you percieve? I can honestly say that I little idea of how responsive these firms are to individual home valuation issues."
  • April 21 2012
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"Thank you for taking the time to post, but I actually didn't learn anything I didn't know from reading your comments."

" I post so seldom and there seemed to be a desire for somebody from Zillow to chime in here, so I regret that I haven't really shed any light on how we approach things or helped you really. I do have the sense from these exchanges that the only response I could provide that would be acceptable would be to either license every appraiser to perform a custom valuation of every home in the country or stop producing Zestimates on all homes altogether (because, as noted, I believe a Zestimate only on some homes isn't that helpful). While I have readily acknowledged that our current solution is not always perfect (but it is very good overall), I would hope that we could also agree that having no Zestimates at all is not a good outcome either and that Zestimates, in the aggregate, have increased the amount of information we have about real estate. I'm guessing that I won't get agreement on this statement by some on this thread, but I do think the Zestimate has utility to a large number of our users and that this fact has helped fueled our traffic growth over the past six years (despite the fact that they don't bother stopping into Advice to thank us for their Zestimate as @blub says!).
Surbiton, I'll check in with Rachel to see if she still has your address from our earlier investigation and I'll have one of our statisticians take another look (tell Corelogic and Chase to match that)."
  • April 21 2012
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"Yeah, I'm beginning to think we're just not going to see eye-to-eye on this one, Surbiton. 

I was going to draft a point-by-point response about how FICO models are trained on a data set of delinquencies (which one doesn't see in a credit report) just like you don't see all the comps that are used to create the Zestimate model, how the thread below is not actually referencing an identical house on all attributes (just a similar house and the difference between the two is only $6,000!), and ask whether you'd favor regulating car valuations if cars were harder to value, but I'm betting we could go on all night in this fashion. "
  • April 21 2012
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"Our respective positions would seem to be the following: 

Stan: 
a. The vast bulk of Zestimates are quite useful for a lot of real estate decisions. 

Both Stan and Surbiton: 
a. Zestimates should continue to get better. 

Surbiton: 
a. Opinions of value that are difficult to estimate should be regulated by the government. 
b. People who disagree with other people's opinions of value should be allowed to suppress that opinion even if it is based on public facts. 

I'm less than optimistic about the prospects of either of us putting more items in that middle category of agreement. Thanks though for taking the time to help me understand your perspective. 

I'm still going to look at the issue with your house again. 

Good night, Surbiton. "
  • April 21 2012
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" Oh, hey, so this is where the conversation went. I've been posting over on the original thread that Tug references above and was wondering where everybody went. Perhaps I should re-post my comments over here. 

@Surbiton. Wow, such cynicism. Actually, the honest truth about my early morning social media foray was that I had a Diet Coke before bed last night, could only sleep a few hours, got up, got through all my emails and had the relatively rare luxury of getting to see what was happening in Advice.

Unfortunately, as I have been told repeatedly now, my comments were neither new nor informative (ouch). This has taught me two important things: 1) don't drink caffeine; and 2) the people who help each other in these forums day-in and day-out are pretty smart and have generally been dispensing advice at least as good as any that I have to convey. Thank you to all who do so.

I'll try not to be such a stranger. And, no, Surbiton, this isn't because of some new memo that we've circulated here in the mother ship; they're really quite interesting discussions. I do fear that they are not all undertaken with a spirit of being open to being convinced and trying to see the other side, but most are and that's enough for me. "
  • April 21 2012
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"Yes, there is a tension of course between the time I can spend here and the time I need to spend to make Zestimates better. As noted, I will try to be less of a stranger. 

Have I pieced it together correctly that Tug of War = the contributor formerly known as Dune's?"
  • April 21 2012
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"Cool"
  • April 21 2012
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" Busy AM but I'll get back to you, Tug, by EOD on your question about opt-out. 

Pasa, I'll also try to take a look at those other two threads on which you thought I might be able to shed some insight. "
  • April 21 2012
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" About opting out of Zestimates.

Short version:

Half of Zestimates are above the sale price, half are below. Research suggests people over-estimate their home value. Put these two facts together and I would suspect most Zestimates would go away as individual homeowners suppress estimates that are below their percieved home value. They would do so even though they find it useful to look at Zestimates on other homes for myriad legitimate reasons. Classic tragedy of the commons problem: individual rational decisions create a collective outcome that is worse.

Home facts and sales (with some exceptions) are all in the public domain (in fact, estimates in the form of tax assessments are also already in the public domain). I don't believe you are invading somebody's privacy to estimate the value of their home based on these public facts. Opinions of value on homes are plentiful, coming from Zillow, AVMs used by lenders, realtors, appraisers and local real estate mavens. Home buyers are smart. They visit lots of homes and they aren't going to refuse to buy a home they love just because the Zestimate is below the asking price if they have reason to believe that the home is priced fairly relative to other homes on the market or they reasonably believe that another buyer will buy the home at the asking price. "
  • April 21 2012
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" About opting out of Zestimates. 
Long version [Part 1]: 
First, on the general propriety of estimating values on homes other than yours. 
Yes, millions of people look up the Zestimate on their own homes because they might be thinking about selling, or renting, or refinancing, or they want to know whether they are in negative equity, or they want know whether they might have equity in their home for some project, or for a myriad other reasons. 
But millions more also look up values on other homes. Why? Because they might be interested in buying a home, or finding out home values in some place in which the aspire to live, or seeing the current value of a home they used to own. Is it wrong that they do these things? By doing these things are they infringing on the rights of the owners? Have you ever looked up the Zestimate for a house other than your own? Was it useful to be able to do so? 
What if there weren't Zestimates and somebody still wanted to figure out the value of somebody else's home?  Well, the physical specifications and prior sales transactions for most homes in this country are in the public domain. They could easily look them up and estimate the value of somebody else's home. Or ask a realtor or appraiser to do so. For that matter, tax assessments are based on property valuations which are also in the public domain. Does the owner have a right to prevent you from doing any of these things? Has it materially harmed the owner that you have done so? Did it help you?  "
  • April 21 2012
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" I'm of the mind that you are fully within your rights to estimate the value of anything that you want. Particularly things like homes which are considered to be so fully in the public sphere that governmental entities not only collect facts on them but also freely publish these facts, create their own estimates of value about them, freely publish these values, and also base public taxation on them. 
Next, if we agree that you have the right to value any home and that it can be useful for you to do so at times, let's say a company figures out a way to do this task for you, do it on all homes, and do it for free. The estimates have some error with them but you know that the error is generally equally above and below the real value and the general range of the error suffices for your present purposes. If you need more precision, you'll contact a realtor or appraiser. Let's assume that this pleases you since you wanted the estimates anyway and now you don't have to do the heavy lifting of getting them yourself. This is all we've done at Zillow. 
If people can suppress Zestimates, I would expect them to be rational when doing so and pursue their own self-interest. Half of Zestimates are below the closed sale price and half are above the price. If people were perfect predictors of their home's true value, I would expect half of all homeowners would suppress their Zestimates because it was not advantageous for them to let others see this estimate. Unfortunately, most studies reveal that people are not perfect predictors of home value and they instead tend to over-estimate it. This fact would presumably lead to more than half of Zestimates being because more owners would think the Zestimate was lower than their home value even when it, in fact, was not)."
  • April 21 2012
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" This would destroy your ability to meaningfully observe any values on other homes because you would now be looking at a fraction of the homes out there (so the particular home in which you're interested might be one of those suppressed) and you would have a logical reason to believe that any estimate left on a home was hopelessly too high. 
My feeling is that lots of people have valuations on homes. For my own house, I've got my own estimate, Zillow's got one, my two appraiser friends have their own estimates, several realtors I know have theirs, and several of my neighbors opine regularly on the values of every home in our neighborhood. Probably more of these would be published if some of the opinion-holders' business models didn't require payment before providing the estimate, but that model is working for them and I still get access to their estimates if and when I need them. "
  • April 21 2012
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" About opting out of Zestimates. 

Long version [Part 2]: 
Arguments for suppression of Zestimates often seem to be of two main types: privacy and damage. On the privacy objection, facts about homes, sales and assessments are all generally public with a few exceptions here and there (again, because we all have a stake in them since they determine taxation and we have to have transparency in order to ensure fairness). And I can easily find somebody (realtor, appraiser, several of my neighbors) to create an estimate of value for your home and few would find this an invasion of your privacy. If anybody can create an estimate on anybody else's home, it's not clear to me why the publication of any of these estimates then becomes a privacy issue. 

On the damage issue, people sometimes claim that Zestimates drive market decisions as opposed to tracking them. Again, the fact that half of all sales are generally above the Zestimate would seem to put the lie to this claim. How can the Zestimate be driving what people are willing to pay when half of all buyers so readily pay more for the house than the Zestimate? Why does this happen? Because buyers are smart. They may use the Zestimate as a starting point but they are the ones visiting open houses every weekend and meticulously watching what is selling and what is not. They and their agents know what it will take to get a house or they learn relatively quickly. If somebody loves your home, thinks that it is reasonably priced relative to all the other homes that they've looked at, and has a reasonable fear that others might also love your home (i.e., time is not on their side), then I personally have more faith in people than to believe that they are going to sit on their hands and let somebody else buy the home just because the Zestimate is below the asking price. "
  • April 21 2012
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" Do I think that plenty of buyers tell sellers that they won't buy a home because the Zestimate suggests that the home is over-priced? Definitely. But I think this form of conversation occurs in all negotiations for most expensive products and occurred long before the Zestimate became a frequent data point used in such conversations about homes. Buyers will always tell sellers that the price is too high and will use all data points available to them to make their case (e.g., alternatives in the market, estimates of value, prior sale prices for the same item, etc.). Bottom line though, people ultimately have more fundamental reasons that drive what they chose to buy or not buy. I do hope though that the Zestimate makes them think and ask questions for themselves and get other opinions. The market place is better if they do."
  • April 21 2012
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Profile picture for Dunes ..
Now all my comments...Opinions.......Naw

If I see more of Stan's Comments I'll post them
  • April 21 2012
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Bump
  • April 22 2012
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Should have said....now's the time to chime in if the need is there


  • April 22 2012
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