Profile picture for RussHatfield

Zillow Announces Zestimate Improvements

Starting this evening, we have expanded and improved our database of nearly all homes in the U.S., adding more data on more homes and improving the accuracy of our proprietary Zestimate® home valuations.

Read more about this exciting change in our Zestimate Improvements FAQ.

We understand that there may be many questions about specific Zestimates. As our Zestimate algorithm is proprietary we will be unable to answer with specificity why your Zestimate is what it is, or why it may have changed with these improvements. Again, we invite you to read our FAQs on the topic to get a better understanding of what Zestimates are all about:

Zestimate Improvements FAQ
What is a Zestimate?

We will also be updating our Zestimate Values and Accuracy data.

Update: We now have two blog posts on the recent changes...

Zillow Expands and Improves Database of Homes
Upgrading the Zestimate

Thanks for using Zillow!
Russ
Zillow Customer Support and Community Relations
  • June 13 2011 - US
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Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (356)

@Fred Barry
Measuring our accuracy
Our core metric for measuring accuracy is median absolute percent error, which measures the percent difference between the Zestimate and the actual sale.  For computing accuracy metrics, we look at transactions over a three-month window of time and pair each transaction in that time period with the Zestimate value generated for that home immediately prior to the sale date.  For example, a home sells on February 15, 2011, and we'll pair the sale with a valuation produced on February 12. In addition to median error, we also report the percent of transactions in the time period that are within 5%, 10% and 20% of the actual sale price. Since so much of Zillow's mission is about increasing the transparency of data in the real estate market, we apply this same rule to our own data and, by doing so, help consumers and professionals better understand the performance of our models across all geographies.


Regarding accuracy data, the best we can do is document how we compute accuracy and what the results are using that methodology.  If people choose to not believe those numbers, they are free to independently verify them (the Wall Street Journal did so back in 2006 and found that what we said was, in fact, true).
We cannot release all of our data both because of obvious business competiveness reasons and restrictions on our data licensing agreements.
  • June 17 2011
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Two new additions to help share the zestimate information.
We added verbiage on the HDP (Home Detail Page)  regarding the new algorithm.

It's right above the Zestimate.

We also added verbiage to the home report email
  • June 17 2011
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Profile picture for RowellK
Rachel, you're (Zillow is) completely failing to see the major point of what many posters here (myself included) are trying to make.   You have data on property values back to say 2008.  The economy and the housing market was completely different then than it is now.  When Zillow applied its "improvements" to historical data, you are looking back to 2008 and applying TODAY'S environment to those numbers; which turns your historical data into a mass of incorrect numbers.

The house I purchased in 2008 was originally on the market for $240,000.  It was valued around $220,000.  The owner was so desperate to unload the property, she sold it for $160,000.  Just because she sold the house for $160,000 (the sale price that Zillow used as their datapoint) does not change the real fact that, in 2008, the house was worth $220,000.
At the moment, my next door neighbor has a much smaller home that's valued for about the same as my home; before these "improvements" there was a price difference of at least $30-40k.

Copy/Pasting the company line about how error rates have been improved from 12.4% to 8.3% means absolutely nothing when the customer base can poke holes through the logic and the numbers.  The "improvements" may suit today's environment fine, but when you use it to adjust previous values, you're painting a completely wrong picture.

I really think this is going to be a cause for concern in Zillow's credibility.  If the company really doesn't care what their consumers' are saying, then I foresee future problems going forward.
  • June 17 2011
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Profile picture for gannon302
I bought my house for a low price, the person I bought my house from had bought it at an even lower price,far below market value. As a result of Zillows changes the Zestimate of my home as varied from 450000 to todays low of 77000. all this in just 3 years. The value of my home according to zillow is no longer in line with the other homes in my area. Even if the zestimate of my home was off before the changes, the ratios to comps were still on, which is the most important fig. for zillow users. Other houses on my block that are teardowns are now valued at 25% more than my home,I must assume that this is because of zillows use of sales records for my home. This should have gone through heavy Beta before being released, then trying to justify obvious mistakes to an already stressed and distrustful public.
  • June 17 2011
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Profile picture for blue screen exile
RowellK -

You are incorrect about Zillow using "today's market" to determine "past numbers".  That is not at all what they are stating.  They used "past market" numbers to determine the past market, never future numbers to model earlier numbers.

The real issue many are complaining about that has not been properly addressed as of yet is that there are some conditions that cause the model to go to extremes... I'm assuming this has to do with "sparse data" in given markets; but without the specifics, it is not easy to determine.

Sure, it is a good thing to get the aggregate median deviation from the "sold" data down, but it is not helpful to many when the small percentage that don't fit the model well go to some kind of extreme, or if they oscillate wildly.  You need to realize that the "model method" they use is "self learning", much like the speech recognition or text recognition algorithms.  And when those "get it right" they do pretty good, but when they get it wrong, it is not only pretty "useless", but pretty confusing.  Sure, it may just take some more "training", but it probably actually needs some "special cases" exceptions, and Zillow's staff needs the general public to bring those issues to their attention to address them in a timely manner.

The model at least each county area separately, and there are over 3000 of those for the nation, and that is quite a chore for the small staff to check by themselves.

And it is true that Zillow needs at least one addition metric for measuring the difference between "sold" value and "estimated" value.  I would suggest standard deviation, separately for both those above and below.

Others might suggest maximum difference....

Remember how Zillow indicates they measure the difference... for each "sold" unit, they use the estimated value just prior to the sale.  And since the modeling only works the data "forward" (not backward), future sales never affect past estimates.

Most of the "sold" data is from the county records, but where that is not available, Zillow has found other numbers to use for the modeling; possibly "list" prices, since non-disclosure states are still not showing sold prices nor sold dates.  Those in Texas have been stating Zillow has been using mortgage amounts there; but I have no way to confirm that one way or the other.
  • June 17 2011
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Profile picture for northwest
Gannon302, your situation rings true with several properties I am tracking that were bought below market value. Yet lesser properties have disproportunately higher zestimates because they were bought closer to the bubble at the asking price.
  • June 17 2011
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Thank you Pasa-
Exactly.

"You are incorrect about Zillow using "today's market" to determine "past numbers".  That is not at all what they are stating.  They used "past market" numbers to determine the past market, never future numbers to model earlier numbers."
  • June 17 2011
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Profile picture for blue screen exile
gannon302 -

You have pointed out the biggest problem of automated valuation methods without site visits...

How do you determine maintenance condition without a visit?  How do you determine if deferred maintenance was addressed?  How do you determine if it is not a "spec house" but is a "luxury house"?

The only numbers Zillow has for that is the "last sold price & date", and the "tax assessed value".  These numbers are good for a "starting point", but they don't answer the question of  "changes".

The method still in use last week way over-estimated the fixers, and way under-estimated the "newly remodeled" and the "upper end pricing".  The new method appears to have gone the other way on the prior "fixer" sale pricing.

Now if someone bought for fixer pricing but it wasn't a "fixer" but just a prudent negotiator?  How is the software supposed to know?  That is why people pay appraisers.  But Zillow still needs to attempt to model these, and the best choice they could come up with presently is treat them as "fixers".

Now, if you have a recommended solution to this dilemma, there are many that would love to know, especially the Zillow statisticians and people like me that want better numbers.
  • June 17 2011
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Profile picture for TerryHershner
Thank you Rachel and Zillow for adding:
"On June 13, the Zestimate algorithm and history were updated. Learn more"

I can only assume that will help a lot of people understand before they leave the site frustrated.

Still waiting for the link to the old Zestimates...

Do that and I think 90% of the confused people for the foreseeable future can figure out for themselves what is happening instead of jumping on the forum all upset and taking everyone's time.  Plus, in a way the zillow zestimate history is exactly like a stock chart history, and if changed, the old data needs to at least be preserved.  Someone referenced that data on a previous date and used it to help them make a decision.  They did not reference the new data.  For that reason, almost everyone who bought or sold a home in the past 7 years will want to be able to access the prior history to remember the factors that helped them make a decision, and are a little frustrated it is no longer there.   Getting the banner in place only took a week, so I'm guessing a link to the old data should take about a month?   The sooner they can do this, the happier everyone will be with zillow, including potential investors, wink!
  • June 17 2011
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Profile picture for sunnyview
I would appreciate the historical data too. It seems to me right now Zillow is trying hard to put out the fires first, but I hope they will at least consider providing historical Zestimates. Honestly, if the new formula works and has the bugs out it may not be needed as badly. Time will tell on that.

When I bought my house, the Zestimate was almost 40% over what I paid. My house was in great neighborhood with a great floorplan and top schools, but was really super ugly inside and out. I mean U-G-L-Y. It was on market for less that it's crappier built comps even considering the cosmetic work that needed to be done. My tax assessed value was very high and did not reflect the true state of the house.

My Zestimate dropped closer to what I paid after my sale was recorded. Technically that was market value since no one but me wanted to buy it. As time has gone on, my Zestimate reflects the fact that more sales for similar houses or smaller houses has allowed Zillow to see that I just got a deal and my house is not different or worse than it's neighbors.

Watching the adjustment on Zillow during that time was painful because I knew that the lack of landscaping, the scowling tenants for showings and the horrid colors inside and out were largely responsible for me getting a great buy. All anyone else including my family could see was that my Zestimate was "dropping". Eventually, my Zestimate evened out--not perfect, but within range before this change.

I hope that Zillow gets these bugs fixed, but I know from past experience it will take a little time. I've learned to try to be patient and give the system hiccups a chance to work their way through. The waiting is hard, but hopefully the result will be better in the end.
  • June 17 2011
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Profile picture for Vin7

Something is rotten in Denmark!
Hello Zillow,
How does one de-list one's home from zillow?
Do you even know the local markets in our communities?
For years, your "old" algorithm was tracking the market, tracking home prices, sale prices,  and doing a fairly accurate job at it. This "new" algorithm is all over the map. Some homes have "fared well" by staying at their former values, or going up a little. Other homes have, in one day, lost more than $ 200,000 in value, despite recent improvements that make the home better than it was when you valued it $ 200,000 more. This is gobbledy-gook analysis and bogus math !
Let me guess - you at Zillow are, surprise, going for an IPO ! And you are leaving allk the home owners in country in the hole as to fair and accurate housing prices. How dare you !

  • June 17 2011
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Profile picture for wetdawgs
bump for the Friday evening crowd
  • June 17 2011
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Profile picture for smartasasackofhammers
All previous Zillow estimates are now, in the words of Ron Ziegler, "inoperative".
  • June 18 2011
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Profile picture for knga
Three reasons I've lost my faith in Zillow: #1. The only real measure of market value is how much a house sells for.  Case-Shiller says my area is about where it was when I purchased in 2004.  Zillow basically agrees re: Zipcode.  But they show my home to have declined in value by 13%.  Don't get it.  Comparables in the neighborhood are doing okay. And last month's Zestimate showed no such discrepancy.  Some rotten variable is screwing the new algorithm.  #2 My value history now bears no realtionship to anything I can figure.  Apparently, I suffered a 27% drop in value in early 2006, while nation, state, city, and zip were all rising.  I partly recovered in 2007 and 2008, apparently, while everything else was collapsing.  My value history looks like a drunk dashing away from market trends.  #3 The relative values for homes in my neighborhood also seem nonsensical now -- they've not changed in tandem.

Final point: Zillow should not crow about improved accuracy, while also claiming to not affect buyers' expectations. Zillow is creating expectations of what constitutes a "fair price,"  which must contribute somewhat to bargaining behavior.
  • June 18 2011
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Profile picture for supercodydog
Just curious, but it seems many posters who bought at "lower prices" and thought "fair market balue" was higher.

If you bought a house at say 160k and prior sales were at 22ok, isnt the 'new' market value 160 and not 220? Unless it was some off-market transaction, the home should have been exposed to the market, and all interested buyers, the seller (if a bank) has a responsibility to sell at best and highest pricing. If an individual, its up to you, but most folks will seek out the best price anyway.

Agents talk up the 'instant equity' stuff, but if your 160 was the best bid they could find, I dont see how 220 was the correct 'value', as the seller couldnt find a buyer at that price.

  • June 18 2011
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Profile picture for RowellK
supercoydog,

If you buy a 2010 Ferrari for $5,000....does that mean that car is now worth $5,000 ???

Same thing with a house.  If you buy a $2,000,000 12 bedroom mansion for $50,000, that doesn't mean the mansion is now worth $50,000.

Which is the whole point of my posts.  The value of a property is not the last sale price.  Economic times have been tough since 2007-08.  Even back then, people had to get out from under bad mortgages, and sold at a lower price than what the property was valued at.  The home I purchased originally listed for $240,000...but quickly went down to $160,000 as the seller was desperate.   The same thing for the house next door.  The original owner died, leaving the property to his brother.  The brother wanted to sell the house fast (so he didn't have to deal with property taxes).  The house was valued at $100-110k.  It's still up for sale for $64k.   Does that mean the house is not worth $100k?  No, of course not.  It means that people in desperate times take desperate actions.
  • June 18 2011
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Profile picture for supercodydog
But if times are tough and nobody is paying last years or two years ago prices, that kinda indicates to me, that the new "value" is what is being paid, and not what was paid or what a sellers' nostalgic price view is.

Also, as distressed home sales/prices now account for like 30% of sales, it becomes difficult to exclude them as they are such a big part of the market.

I think your examples are extreme, so they dont really work. Maybe consider if current market price is below replacement cost (and by how much) as an indicator of supposed value.
  • June 18 2011
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Profile picture for davebb75
I don't like this new system! My home value dropped by $20,000 overnight, when other houses remained the same or dropped as well!
  • June 18 2011
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Profile picture for TerryHershner
Who would sell a 2010 Ferrari for $5000?  It must have been wrecked and only worth $5000.

Same with a house.  If it's on the market for a decent period of time and sells for $160k instead of $220 then there must be something wrong with it that needs repair.  Perhaps $30k-$60k of repair!  This is the only fault I currently see with zillows algorithm that tries to plot the sales exactly on their estimates.  When lots of gutted houses were selling for half their value, because they needed new drywall, new copper wiring which had been ripped out, appliances and bathroom fixtures which were stolen, etc, basically $100k in repair, but sold for $160k in say 2007, zillow mysteriously priced this home at 160k by backdating their new algorithm, where before they may have valued it at $240k.  Now that the new owner has fixed it to be equal or better (newer fixtures and appliances) the value should be higher.  But zillow has no way of knowing that it's been upgraded.  The error was valuing it at the sale price when it was not in livable condition at the time of sale.

But a home that has not been destroyed, if it has been on the market for a while, and sells for $160k because no one was willing to offer more, that in fact would define it as at least close to its new market value.  Everyone can negotiate 5 or 10 grand here or there off a "fair" price to either close quickly, or close in cash, but unless there are extremely rare circumstances, what a willing buyer will pay a willing seller in an open market defines it's real value.
  • June 18 2011
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  • AOTW
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TerryHershner
"what a willing buyer will pay a willing seller in an open market defines it's real value." Not so much. There are any number of things that can make a transaction variable, without affecting the "real value. The old canard you present would have absolutely prevented "house flippers" who add nothing to the house but a better sales team.

I watched a house sell for 750k last Jan, receive not even a key in the door from the new owner - just a new broker's sign in the lawn - and sell in Mar close to 830K. You need to come up with a new platitude that explains that sort of thing.
  • June 18 2011
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Profile picture for TerryHershner
Agreed AOTW.  In this day seeing that is rare but I'm sure does occasionally occur.  Although that is one of the more extreme price differences I've seen without any improvements.  Are you sure it wasn't a foreclosure?  Either that market area changed drastically in 2 months or the prior agent listing it wasn't doing their job.  With it taking 45-90 days to usually close, the new buyer who closed in March must have seen the house in Jan? Something about that doesn't quite add up in my book.  Not saying it didn't happen, but you must admit, that does not occur often like that.  But to go back to the main topic, I guess the "zillow" value should be $830k as that is what most recently someone was willing to pay for it.
  • June 18 2011
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Profile picture for TerryHershner
Haha, I was just thinking there must be some strange circumstances behind that home, because what buyer would not receive a key for the home or go inside?  A foreign investor because of the falling value of the dollar would be my guess.  Probably buying in cash.  And it must have not been on the market long beforehand.  A necessity to determine true value and not just a desperate seller or a foreclosure that has been on the market 3 days.  Strange indeed.  But whether it is stocks, bonds, commodities, or real estate, willing buyers and willing seller transactions almost always determine real market value.  Exceptions like that are extremely rare.
  • June 18 2011
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Profile picture for mkasloff
You blew it.
  • June 18 2011
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Profile picture for Billy Stickle
Impressive! My home's Zestimate adjusted from $550,000 to $105,000. This is no longer a useful tool. Zillow is dead.
  • June 18 2011
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Profile picture for AOTW
  • AOTW
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The "key in the door" may have been a slight exaggeration, but the house was totally unchanged. Previous sale took 3 months and was a straight up sale by a fellow that thought as you did, that market would determine price.

The sale was a family house after the of his parents (not in the the house, btw).
Definitely not a distressed sale, the first owner sort of feels he was beaten out of 80k.

Check it out. http://www.zillow.com/homedetails/1471-Hillcrest-Blvd-Millbrae-CA-94030/15508536_zpid/
  • June 18 2011
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Profile picture for TerryHershner
I can see your concern on that.  This is a perfect example on where I would love to see the old zestimates.  It looks like when it was for sale for $830k it sold for $750k, and when for sale for $750k sold for $830k.  It's currently listed for sale.  I'm assuming that is a mistake. 

But again this is only a 10% difference. (80k on 800k).  There are much much bigger discrepancies that are all over the place right now.  A previously listed example was a 140k that now is worth 20 million.  Do the math on that one, and find the example in one of these posts. 

Bottom line is a zestimate does not determine home value, an appraisal or BPO does not necessarily determine home value (although many times better) the only thing that determines home value is liquidity and adequate time for sale in an open market.  If there are 100 sellers in an area and only 1 qualified buyer, someone is bound to be willing to take a loss to sell their property if they can not afford to lose a buyer and have to sell.  This is not necessarily fair value but an influenced decision, and zillow would be incorrect by valuing that home at that amount.  If you can afford to wait, as a buyer or seller, you can in theory get market value.
  • June 18 2011
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Profile picture for AOTW
  • AOTW
  • 35 contributions
I think the greatest danger is in the "only 10% off". The 140k place in the millions is obviously a mistake, but as accuracy improves, and the Zestimate is taken as accurate, a shift leads rather than follows the market.
  • June 18 2011
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Profile picture for droopyd
The "zestimate" value of my house jumped from the high 580s to about 620 under the new algorithm -- about 5%, which is within a reasonable margin for error.

However, the past history is now all out of whack. Before the new algorithm was used, there were some minor month-to-month fluctuations, but the overall trend lines were fairly consistent.

Now, however, we take the following "zestimate" roller coaster ride:

Sept 09 - 619k
Jan 10 - 578k
April 10 - 709k
July 10 - 576k
Aug 10 - 711k
Feb 11 - 517k
June 11 - 619k (where it was almost 2 years ago!)

Clearly, the estimated value of my home should not have jumped all over the place like this. The "zestimate" should not change by nearly 200k (30%) within the space of a few months, regardless of the algorithm used, especially in what has been a relatively stable (albeit slow) housing market.

This leads me to suspect that there are still some bugs to be worked out in fitting the new algorithm to historic sales data.
  • June 18 2011
  • 1Yes

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Bup
  • June 18 2011
  • 1Yes

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How can Zillow rewrite history?  If they are able to just take back what they have reported over the years, how credible can they be?  I would understand if the new algorithm will be used from here on out but you just can't rewrite history - at least not without a hefty apology.  

"Proprietary" algorithm or not Zillow needs to stand behind their reporting. My Zestimate went UP $400K this week due to these new changes. Whether these corrections hurt or help property values, the historical charts should not be retroactively adjusted.
  • June 19 2011
  • 3Yes

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