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Zillow's use of a comparable value of $0/sq ft when sales price is known but square footage.

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kjeldsorensen

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I check Zillow regularly and the values are normally in the ballpark.  But my home's Zillow value has gone down over 25% in the last two months.  The reason...Zillow now uses (as part of their 10 comparable sold homes) 3 homes which have a value of $0 per square foot because Zillow had an accurate sales price but unknown square feet.  Having a known sales price and unknown square footage is not a $0 per square foot comparable and using it is incorrect.  Using the zeroes in my case brings the per square foot cost of comparable homes to $107 per square foot.  Ignoring the zeroes and the average price per square foot of comparables is $153.  This is a pretty basic flaw in valuation software. 

   
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June 14 - Gaithersburg
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Stan Humphries, "Stan Humphries"

Seattle, WA

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Hi kjeldsorensen.  By "comparable homes" do you mean the "Nearby Similar Sales" shown for the home or the "Comparable Sales" shown when creating a My Estimate for the home?  Both of these sets of homes will include nearby sales to your house but it is not the $/SQFT from this set that is used to value your home directly (i.e., our algorithms don't use $0/SQFT to value your home).  The algorithm will use these and many other homes to develop a variety of models that are used to value homes in the area.  Some of these models use SQFT but homes without SQFT will not be used to estimate the influence of SQFT in the determination of the sale prices of recently sold homes.

It is a common assumption that the nearby sales or comparable sales that we show to help users gather information about local sales are used directly and solely in the algorithms, but they are not.  They are used in conjunction with lots of other sales in the area (which are then adjusted via statistical approaches to develop models useful in estimating local sale prices). If you have suggestions for how to make this distinction more prominent to users, please let me know.

As to why you are seeing large price drops, how do these price drops for your home correspond to changes in the Zillow Home Value Index for your area (shown on the Zestimates&Charts tab of the home)? If the trends are substantially different, is it possible that you have changed the underlying facts about your home recently? 
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June 15
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kjeldsorensen

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Yes, I made a change.  I put it up for sale with a price $100,000 below your then Z estimate.  You then lowered my value by 200,000, or over 15% in less than 2 months.  No, prices had not dropped by 15% in two months in my area.  
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August 18
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Stan Humphries, "Stan Humphries"

Seattle, WA

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Hi kjeldsorensen.  Did you change the home facts themselves when posting the home?
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August 19
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kjeldsorensen

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The realtor posted the home for sale.  She used exactly the same square footage and provided many more facts about the home, i.e., number and type of rooms, ceiling fans, etc.  Apparently the extra detail may have had some blame for lowering the value by 15% in two months, but I can't see what she added that lowered your valuation, other than the sales price.  I hope that's not it because we were going in at what we thought was under the market, and your valuation quickly made it look like we were over the market.

As a Zillow user, it appears that Zillow is valuing a huge number of homes without adequate information about those homes.  Unfortunately, some users think Zillow has a greater accuracy than it has (I was one of those users).   I think Zillow is immensely useful if it is providing close to accurate valuations.  If it is not, then it just confuses users and the real estate marketplace with wrong valuations.  My hope is that Zillow improves it's accuracy in years to come.

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August 19
 

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Discussion Zillow's use of a comparable value of $0/sq ft when sales price is known but square footage.
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