Few things have influenced the way we navigate the home buying and selling process in recent years like Zillow, and more specifically, the Zestimate.
The digital real estate company’s home valuation model has become something like gospel in the market, as millions rely on the estimate to judge property values. Zillow has data for more than 110 million U.S. homes and publishes Zestimates for 104 million of them. The Zestimate uses property records, data from Multiple Listing Services, and user-submitted data to determine the value of a home, according to the company, but it shouldn’t be used in place of a formal appraisal.
When the tool was first launched in 2006, it drew such high traffic to the site that it crashed. Despite its popularity, professional appraisers have called its accuracy into question for years.
Because the Zestimate relies on data rather than in-person tours, it sometimes misses the mark on home valuation factors that can’t be found in the data. It’s also less reliable in towns where property values can differ from street to street. In 2016, Spencer Rascoff, then the CEO of Zillow, inadvertently highlighted these issues when he sold his own home for 40 percent less than its Zestimate.
Zillow has said it consistently works to improve its model so the millions who rely on the Zestimate can feel confident in the estimate they receive. In 2017, the company even went as far as to host a $1 million competition for data scientists to improve their formula. Currently, the nationwide median error rate for the Zestimate is 3.2% for on-market homes and 7.52% for off-market ones, according to Zillow.
“Homeowners are so passionate about their homes and tracking their homes’ value,” said Stan Humphries, the company’s chief analytics officer said in a statement about the competition. “The Zestimate matters, and that’s why we never rest in striving to make it more precise.”
We want to know: How do you feel about the Zestimate? Are you making real estate decisions based on Zillow’s estimates, or do you hate the influence it has over the market?
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