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Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

193 points by e15ctr0n 9y ago

IanDrake 9y ago
The realtors I talk to hate the Zillow estimate as it typically creates an unrealistic expectation for either the seller or buyer depending on if the algorithm over or under estimates. Apparently it's rarely correct, though I live in a unique area.
- lotsofpulp 9y ago
  If it's not correct, then the sale price will reflect that and Zillow's reputation will take a hit. Don't understand why the government needs to get involved in what someone says something is worth, it's their opinion and they're entitled to it. Edit: It would be funny if Zillow also started putting up alerts about problems with government finances which will likely impact future taxes, such as in Illinois.
  - abfan1127 9y ago
    this is America. they are not entitled to their opinion. /s I completely agree. don't like their estimate, don't use it.
  - geppeto 9y ago
    The government's not getting involved, oh you mean the fact that a judge is going to be involved? Civil courts exist to provide monetary damages if damages can be proved to exist. Yes, they can also compel arbitrary behavior as a part of governing body. This is independent of any stance on Zillow and a state licensing regime. If the plaintiff can convince that the tool is making her lose money, the judge will award her money. "but that means < cue completely uninformed legal analogy >" yes you can make a career out of litigation, many people have.
    - lovich 9y ago
      It cant just be the plaintiff proving that Zillow's tool makes her lose money, can it? If that argument was true then you could get sued and lose for reporting on facts that put the company in a bad light, like poor hygiene in a restaurant, or for competing with another company with a better product.
      - geppeto 9y ago
        you have to also show up and defend yourself. many summary judgements on flaky arguments are made just because the defendant didn't respond. the judgements are collected from you bank in any jurisdiction that will reciprocate
    - lotsofpulp 9y ago
      You're right, I shouldn't have phrased it that way. I meant to say I don't think the government should be involved. Although, I'm not sure why the plaintiff should be awarded anything, even if Zillow causes her to "lose money". Unless Zillow is doing something specifically to her home estimate, then it's merely offering a differing opinion on what they think the home is worth.
      - snrplfth 9y ago
        "Eyyy buddy, you wanna buy this car? Classic 1991 Honda Civic, only 100k miles on it, and most of the doors still open. I'll give you a deal, $10 000." "Yeah, I don't think it's worth that much. A hundred dollars, tops." "Did you just appraise this car? Oh, you done messed up." muffled sound of approaching police sirens EDIT: Hah, didn't see you'd used the exact same analogy elsewhere.
    - deleted 9y ago
      [deleted]
    - thaumasiotes 9y ago
      Nonsense. For the judge to award your money to a complainant, they need to have a loss and you need to be legally liable for the loss. The fact that they have a loss is not itself a cause of action. The fact that you caused the loss is still not a cause of action.
  - IanDrake 9y ago
    It seems to be a civil matter so far. The problem is, you'll never get to establish a sale price if the seller thinks his house is worth 100k over market or a buyer thinks the seller is asking 100k over market because that's what they saw on Zillow. Further, when zillow gets the estimate of a house wrong it costs them nothing, but there are real costs to Zillow's bad estimates to buyers and sellers.
    - dragonwriter 9y ago
      > It seems to be a civil matter so far. A "civil matter" is where the courts—a part of government—apply law—created by government—to non-crimes disputes, often (as in this case) between private parties. It absolutely does not indicate the absence of government involvement, even if the government isn't a party to the litigation.
    - lotsofpulp 9y ago
      If Zillow gets the estimate wrong, then people will stop using their estimates, costing them in reputation and perhaps dollars down the line. There are so many sources of info for house value that I don't see how Zillow could single handedly be manipulating a house's sale price. If it's not selling for what the homeowner thinks it's worth, it's probably not worth that much.
  - tyingq 9y ago
    >If it's not correct, then the sale price will reflect that and Zillow's reputation will take a hit. Perhaps with that buyer and seller. I believe, though, that Zillow rewrites historical estimates when they get new data. So you can't really see how wrong they were after a sale.
    - BeetleB 9y ago
      They do have an Excel sheet that indicates their accuracy for each county. Eye opening.
      - tyingq 9y ago
        Current accuracy, or full historical accuracy? I am surprised they open that kimono voluntarily.
  - mywittyname 9y ago
    It's still a price anchor. If an engineer at Zillow manipulated the Zestimate on a home they were trying to buy or sell, would they succeed in driving the price of the home in the desired direction? I think so. Clearly real estate agents have the same feeling or they wouldn't be suing.
    - rejschaap 9y ago
      Mostly because they want to do the manipulating of estimates themselves.
- aaroninsf 9y ago
  It's somewhere between comical and meaningless in San Francisco. The operation of the algorithm is painfully apparent and AFAI most heavily weights trailing sale price per square foot and sale price over list, as compared to presumed 'comps,' all three of which factors are frankly piss-poor indicators in this market and city. As a proxy at a glance for such comps it's at least an indicator of when (as is common) list price is far below expected sale price, and an arguably cruel fiction designed to attract interest (in my tier: from the desperate). (If you don't live in SF, sales at 30-50% (100s of K) over asking are common again, after a brief cool down at the beginning of this year.)
natoliniak 9y ago
Interesting. I wonder what would her argument be if Zillow simply reported the City/County tax assessors estimates which are usually even lower than Zillow's.
- twoodfin 9y ago
  Zillow does/did record that information, though for my house it hasn't been updated (at least on the public website) since 2014.
- BeetleB 9y ago
  >I wonder what would her argument be if Zillow simply reported the City/County tax assessors estimates which are usually even lower than Zillow's. County assessors for tax purposes are explicitly not trying to determine market price. Zillow should ignore it.
  - leftandright 9y ago
    I'm not sure what you mean. In Illinois (the state from the article) the assessor is calculating the market value: Most real property in Illinois must be assessed based on its value on the open market, or its “market value.” This value is the amount at which a property would sell in a competitive and open market... [1] [1]http://tax.illinois.gov/Publications/LocalGovernment/PTAX1004.pdf http://tax.illinois.gov/Publications/LocalGovernment/PTAX100...
    - BeetleB 9y ago
      Then it likely varies from state to state - or county to county. See http://www.investopedia.com/articles/tax/09/calculate-property-tax.asp http://www.investopedia.com/articles/tax/09/calculate-proper... for different methods used. As an example, some places merely look at the cost of replacing the house if destroyed.
    - skwirl 9y ago
      That's not how it worked where I grew up in Upstate New York. The assessed value was a number way below market value, but assessed values among different houses pretty much differ by the same proportions as the actual market values. I do not know why it is the case.
cavanasm 9y ago
I wonder how many other tech companies fit into this general category of "providing an equivalent to a regulated service without meeting the regulations". You've got the more obvious "sharing economy" type things which are in the news all over the place lately, but I bet there are a bunch of other companies like Zillow that have been flying under the radar for a while.
- jdavis703 9y ago
  Since when is providing a housing estimate a regulated activity?
  - mbroshi 9y ago
    This is from the article: "...the fact that they offer market-value estimates and 'are promoted as a tool for potential buyers to use in assessing [the] market value of a given property,' shows that they meet the definition of an appraisal under state law. Not only should Zillow be licensed to perform appraisals before offering such estimates" It can be surprising when seemingly innocuous activities are in fact heavily regulated (cf. Stanford needing to remove all their learning videos from their website).
    - ChairmanPao 9y ago
      Berkeley. But never let the Truth stand in the way of a good story, especially on hacker news.
    - wuliwong 9y ago
      I don't believe the article is correct in the definition of appraisals. A valuation or an approximation of value by impartial, properly qualified persons; the process of determining the value of an asset or liability, which entails expert opinion rather than express commercial transactions. http://legal-dictionary.thefreedictionary.com/appraisal http://legal-dictionary.thefreedictionary.com/appraisal
      - 9y ago
scottshea 9y ago
It would be great to see how Zillow stacks up to the desktop assessment software used by various mortgage companies and banks.
- cmiles74 9y ago
  Zillow's estimates are famously unreliable. https://www.washingtonpost.com/news/where-we-live/wp/2014/06/10/how-accurate-is-zillows-zestimate-not-very-says-one-washington-area-agent/?utm_term=.348539c6538e https://www.washingtonpost.com/news/where-we-live/wp/2014/06...
tabeth 9y ago
You would think real estate would prove to be one of the few real life fields where machine learning would be able to predict the prices pretty accurately. You have: 1. List price 2. "Favorites" on the MLS. 3. Square footage 4. Bedrooms 5. Bathrooms 6. Sold price for nearby properties 7. Sold price for nearby properties relative to their list price And the list goes on... Is it that difficult to predict? Literally there are hundreds of other features that have a clear correlation to the sell price (amount of people who attend the open house, crime, proximity to busy street, etc.) that I'm not including. I guess the problem is, there's not any money in having an accurate prediction.
- mattkrause 9y ago
  If you want to try it, there are a few data sets kicking around, including a) https://www.kaggle.com/c/house-prices-advanced-regression-techniques https://www.kaggle.com/c/house-prices-advanced-regression-te... b) http://www.bis.org/statistics/pp_detailed.htm http://www.bis.org/statistics/pp_detailed.htm c) https://archive.ics.uci.edu/ml/datasets/housing https://archive.ics.uci.edu/ml/datasets/housing If you had a really great model, you might be able to make some money with it--find underpriced (per the model) houses, buy them, and then try to sell them at the model's price.
  - tyingq 9y ago
    I imagine it's tricky because value per square foot varies quite a bit in adjoining neighborhoods. And sometimes within a neighborhood. And neighborhoods aren't necessarily well defined geographically. And, some neighborhoods go long periods of time without any houses being listed or sold. So the whole idea of "comparable sales" is shaky.
    - natoliniak 9y ago
      > value per square foot varies quite a bit in adjoining neighborhoods. And sometimes within a neighborhood The quality or rather "reputation" of the assigned public school is probably the best predictor of this variance. The problem is that the school's reputation can diverge from the official grades, so this is difficult to quantify.
strictnein 9y ago
The Zillow estimate used to be spot on in our neighborhood, for several years even. Recently they all plunged to 10-20% below market value, even though all sales data puts it at the previous mark. The weird thing is that they also went back and recalculated old "Zestimate" data as well. On April 2nd the estimate for our house was $617,453, which is more or less what it would sell for. It had been above $600k since June, 2016. This month it was $544k, and there's no sign it ever got above $580k in the historic graph. It claims it was $546k on March 31st. One thing I did notice was a new button underneath the estimate: "I disagree with my Zestimate" which, surprisingly enough, is a lead gen for realtors, not a method to try and get them to change.
- colordrops 9y ago
  I live in a hot real estate market (L.A.), and I've spent about 5 minutes (no exaggeration) looking online at the prices of houses in my neighborhood, knowing the actual closing price of recent sales, and my first thought was that prices were about 10-20% below market value. It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.
  - WaxProlix 9y ago
    This is the same in Seattle, where a house's asking price can be 550, its zestimate (or Redfin estimate) will be around 570, and the price it actually goes for invariably ends up around 700. This has been the case for months, and it can almost seem like some sort of conspiracy between realtors and these meta-agencies to game the market. There are plenty of comps that show prices are WAY above what the 'estimates' show, and yet these professionals are seemingly oblivious. Fear of another 2008? Too much success drumming up bidding wars by underpricing? Whatever the reason, it's pretty infuriating as a buyer because it creates a sort of information asymmetry which makes a major decision really painful.
    - tehlike 9y ago
      Yes. Some known realtors underprice the property to start bidding war. The foreign money in the hot markets also doesnt help. It sucks to see a house list for 2.9m and sell for 3.7. it happens quite often here in the bay.
MichaelBurge 9y ago
This is as ridiculous as suing Nolo for publishing law books without a license. The only reason why the government needs to have an appraisal license at all is because the government handles the loan for the house. The goal is to mitigate the risk to the government, not to help consumers decide how much they want to pay.
- JustSomeNobody 9y ago
  Or it is to minimize the number of cases that go to court with people squabling over how much something is worth.
  - deleted 9y ago
    [deleted]
inetknght 9y ago
Someone fighting back against Silicon's Valley nonsensical idea of ignoring laws? This will totally end well! /s
- bunkat 9y ago
  Zillow is a Seattle company, or are all tech companies just considered to be part of Silicon Valley now?
- wuliwong 9y ago
  Like someone else said in another thread. It is not clear to me that giving out an opinion as to the value of a house is illegal.
ChairmanPao 9y ago
It's showing my house as $1,961,232. I think that's way too high.
mr_tristan 9y ago
You can find estimate calculators from various banks, realtors, etc. I just did a basic google search and checked out estimates from Zillow, Chase, and RE/MAX, and they range from 4% under my home price to 11% over. That's a pretty crazy range of guesses. My question is: why aren't these other home estimate calculators subject to being sued, then? (And when I checked out Zillow, I noticed there was a direct link to "I disagree" next to the Zestimate. None of the other calculators had any kind of feedback mechanism.) Seems like the journalist here forgot to mention that home estimates are pretty common and come from many different sources.
- strictnein 9y ago
  The "I disagree" button is a lead gen for realtors, not for you to give them feedback.
  - yellow_postit 9y ago
    Is there evidence they do zero tracking of clicks on that link for model eval.? It seems much more likely it's a case of lead gen and feedback.
- mcguire 9y ago
  'Hasn't been sued' != 'Won't be sued'. Zillow is the most popular and have been pushing it in their advertising.
joezydeco 9y ago
I'd also like to know how or why Zillow lists houses that are "pre-foreclosure". I know it's semi-public record, but that certainly doesn't help the homeowner try and recover maximum value for their property if they decide to sell. On top of that, it's pretty unnerving when you see this pop up for one of your neighbors and good friends. Nobody should have to go through even more humiliation than they already are.
- narrowrail 9y ago
  If you ever hover over the URLs, Zillow is using a 3rd-party service for the forclosure potential properties. It's lead gen, and you have to become a customer to get actionable data.
  - joezydeco 9y ago
    If the house goes up for sale, I can lowball the owner without ever having to buy data from that 3rd party.
narrowrail 9y ago
As long as there are already many anecdotes, I'll just add mine (I've always taken the zestimate as Zillow's working model that probably needs lots of tweaking; it's not like the MLS's are eager to give them data). Anecdote: My folks live in a golf course neighborhood where their house is not on the course, and it's smaller than the rest. However, my folks house is valued based on these extravagant golf-course side properties that are actually quite a bit more $/sqft. Zillow needs to have a human go through manually and adjust for these subtle differences, IMO. Despite dome shortcommings, Zillow is a godsend compared to the systems local MLS's use, just the listing dates/listing removed dates/ last sold for/ days on market dates are worth a lot. Realtors can give you this info, but it is not nearly as frictionless as it could be. Zillow is still looking for that disruptive go-to-market strategy (they already have most of the tools). But, the Realtors aren't going to give up their ~$6K per transaction fees easily. They're much more connected than cab drivers.
- linkregister 9y ago
  Do you see Redfin eating a traditional realtor's lunch?
  - narrowrail 9y ago
    This is an obsession of mine, but I'm not a professional. I dated/ lived with a Realtor for ~20mo, and I asked lots of questions about the workflow of the business. I don't think Redfin has much of an edge in go-to-market strategy. Redfin's allows for more comprehensive data (MLS access because of membership), and Zillow's allows for scalability. Sales data sometimes show 3 months lag from time of transaction and entry into the county clerk's records which gives the MLS quite an edge itself.
- mcguire 9y ago
  $6000 per transaction? It's usually 6%, split between the two realtors.
- tehlike 9y ago
  In bay area it can go up to 150k for a 2.5m$ house. Split two ways.
ProfessorLayton 9y ago
At least in the Bay Area, Zillow et al. are decent for getting a decently accurate ballpark figure in mind. A lot of sale prices are clearly put up below market to grab attention, knowing that the sale price is very likely to exceed it by a wide margin. Here in many parts of the Bay, you'll get laughed at and promptly ignored if you try and use these "zestimates" to try and put downward pressure on the price. Sellers here have many offers to chose from, leading buyers to compete not just on price, but even dropping certain contingencies to push the deal through.
- hbosch 9y ago
  A friend was looking at houses via Redfin. The agent told him on day 1 that he should expect to spend 10%–20% more than the online quote, as a rule of thumb. Since then I've taken "Zestimates" with ~65,000 to 100,000 grains of salt.
  - Jemaclus 9y ago
    I used to work for Z, and I can confirm that the Zestimate is just that: an estimate. It doesn't know things like whether you did renovations or whether the house next door caught on fire and burned down and things like that. If something about your particular house changed in the last few years, the Zestimate is likely to be way off. That said, it's fairly good as far as comps go, and if you have an average house in the hood, the Zestimate is gonna be pretty close. Regarding the rule of thumb you mentioned, my wife and I have been looking for a house in the Bay Area, and we've determined that the listing price is just a completely made up number. We made an offer on a house that was 100K over asking price, and the sellers countered with 40K on top of that (so 140K over asking). I was like... what? You listed for X, we offered X+100K, you don't get to counter that. lol We obviously didn't get the house, and they wound up selling for 175K over asking price (+~25%). We've made several other offers, and sometimes the house goes for 50K over asking and sometimes it goes for 250K over asking. It just seems to be totally random. It's absurd. Instead, we actually rely a lot on the Zestimate and Redfin's estimate to figure out what the "real" value of the house is. Z and R tend to be roughly in the right ballpark for the Bay Area.
anonymous_iam 9y ago
The estimate for my house dropped by 25% in one month when the market was still rising. I'm assuming that the cause was the house next door which was in poor condition and was sold for about 20% below market value. The buyer put $100k into the house and is now selling it above market value ($200k more). It will be interesting to see what the zestimate for my house will be when the other house sells again. (It will probably sell within a month.)
e15ctr0n 9y ago
Realtors have always hated the Zestimate with a passion [0]. When they publicly called out Zillow CEO for selling his own home for 40% less than the Zestimate on it, Zillow magically released a superior algorithm [2]. [0] Inaccurate Zillow 'Zestimates' a source of conflict over home prices | Feb 8, 2015 | http://www.latimes.com/business/realestate/la-fi-harney-20150208-story.html http://www.latimes.com/business/realestate/la-fi-harney-2015... [1] Zillow CEO sold his home for 40% less than Zestimate | May 18, 2016 | http://www.inman.com/2016/05/18/zillow-ceo-spencer-rascoff-sold-home-for-much-less-than-zestimate/ http://www.inman.com/2016/05/18/zillow-ceo-spencer-rascoff-s... [2] Zillow Boosts Accuracy with Update to Zestimate Algorithm | June 8, 2016 | http://zillow.mediaroom.com/2016-06-08-Zillow-Boosts-Accuracy-with-Update-to-Zestimate-Algorithm http://zillow.mediaroom.com/2016-06-08-Zillow-Boosts-Accurac...
- strictnein 9y ago
  [1] reminds of an interview with the founder of Ashley Madison. He was going on and on about how western cultures were so regressive and prude about adultery and sex in general. The interviewer then asked him if he had ever used his own service. This elicited an uncomfortable non-answer that basically boiled down to "No".
  - allenbrunson 9y ago
    "non-answers" are never good, of course, but i can easily see a way he could give a workable answer to that question. for example, he could say that some people are trapped in loveless marriages they can't get out of, but he never has been, so he's not the target customer. of course i'm just playing devil's advocate, because all evidence points to ashley madison being a scam, with essentially no women on the site.
    - chii 9y ago
      > with essentially no women on the site. I would have thought that some gold diggers would sign up for that sweet mistress money!
mazamts 9y ago
I don't understand how you can sue someone for estimating the price of a home. Hopefully this gets thrown out
sibmike 9y ago
Surely appraisals regulation is just another instance of mortgage regulations. But is it not the over regulated mortgage market that blasted in 2008? Was it because of zestimates? Nope? Well here ya go. Let the people speak their opinion and work on their ML.
whahjdjdj877 9y ago
Our house is in the hottest part of Portland, OR, with double digit % increases in the last couple years. Last October when I refinanced, it was appraised at $455k. Zillow had it at $467k-ish. Not enough to bum me out because I also had a now former neighbor sell recently. Buyers got into a bidding war and he walked off with $15k over asking. Seems accurate to me! ;)
razwall 9y ago
Take a look at the law they're suing under, regarding licensing of real estate appraisers (http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=022504580HArt%2E+5&ActID=1368&ChapterID=24&SeqStart=500000&SeqEnd=1900000 http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=02250...). It makes it illegal to "develop a real estate appraisal" without a license. An appraisal is defined as simply "an opinion of value". So if you are driving down the street and say to your spouse, "Look at that house, it's gotta be worth a million bucks," you just committed a misdemeanor. This law as it's written has got to be unconstitutional.
- jcranmer 9y ago
  Illinois is a common-law jursidiction. Any judge would laugh you out of court if you claimed an off-hand comment on valuation was an appraisal.
  - razwall 9y ago
    I agree. So where is the line between an "off-hand comment" that's not subject to the law, and an appraisal that constitutes a misdemeanor? Is it illegal if you post your comment on Facebook? Or on your blog where you talk about various homes for sale in your neighborhood? Or only when you start charging people money to hear your opinion? A citizen cannot look at the law and figure out if they're committing a crime, which is why I said the law is unconstitutional.
    - chasing 9y ago
      I imagine if you offer your opinion about the price in a professional context where your opinion can affect the actual value of the property then you might have to follow some rules. If you drive by a house and say "this house doesn't look like it's worth shit" you're probably not going to wind up in court after someone complains that said house is worth quite a bit more than shit and you're driving the price down. Laws actually can be vague while remaining Constitutional. Sometimes it's unavoidable. Court cases can be used to refine the edges.
CobrastanJorji 9y ago
> Zestimates are within 20 percent 89.7 percent of the time, Zillow claims. So, for an area where the homes average around $500,000, more than 1 in 10 estimates are off by $100,000 or more? That seems kinda bad.
- paulgb 9y ago
  Do humans do any better, I wonder? That seems pretty good for an illiquid market. (But what do I know, I've always rented)
averagewall 9y ago
Sounds like an opportunity for arbitrage that would correct the problem. If "house flippers" start using these low prices to make a quick buck, either Zillow or homeowners are surely going to cotton on and things will settle back down to fairness.
- mehwoot 9y ago
  But what could a homeowner do about it? If Zillow makes your house look a lot less than what it's worth, so nobody wants to buy it for the proper price, you can't do anything. That's exactly what this lawsuit is about. They're not even suing for money right now, they just want the price for their house fixed so they have a decent chance at selling it.
jartelt 9y ago
People are way too tough on Zillow. The article states that the Zestimate is within 5% of the sale price 54% of the time and within 20% of the sale price 90% of the time. That is pretty damn good considering they do not send anyone to look at the outside of homes and they do not go inside homes like an appraiser does. The problem is that people think the value of their homes is equal to what they paid for it plus some percentage gain every year. In reality, the value is just whatever a buyer is willing to pay for it. You can think your house is worth a million dollars, but it is not worth a million dollars if no one will pay that much for it.
- mehwoot 9y ago
  The problem is that people think the value of their homes is equal to what they paid for it plus some percentage gain every year. How is this the problem when you just stated previously that the price is 20% off from reality for 10% of people. The real problem is a shitty estimate becoming something that people treat as a real estimate. Zillow obviously state this isn't the intention, but if they act in a way that promotes it as an estimate contrary to what they state they are doing, well, people are going to get angry.
simonhughes22 9y ago
I have had both our homes (we rent one out) independently estimated and both are worth 25-30% more than the Zestimate. I live in IL like the realtor in the article. Zillow is consistently lower than other sites. The most accurate estimates for our home are on Redfin, which is almost perfectly inline with the appraiser's estimates. Zillow has a pretty overfit model IMO.
- brians 9y ago
  If the estimator didn't offer to buy your house, what makes you think it's accurate?
- bane 9y ago
  I have different problems. Zillow's estimate is about 15% higher than Redfin for us. But there's also issues with the facts each have about our home. Zillow's estimate also goes up and down by tens of thousands of dollars per week. Some weeks it'll be as much as a $40,000 swing. Keeping the data correct on the sites is also a chore, and if I don't keep on top of both sites, entire rooms or bathrooms will come and go, square footage will change and so on. Real estate agents will claim that appraisers don't go off of these sites, but buyers will use them as pricing information so it almost becomes critical for home owners to police these sites to get as favorable an estimate as possible.
- blocacres 9y ago
  This is the flaw here. The seller, real estate agent, banker, and appraiser all have incentives to raise the price of the home. The only person in the transaction who doesn't is the buyer. I've been working on something in this area as a side project, and have been working with the fallout of 2008 in my day job, since 2008... and it continues to this day and the lack of understanding of the incentives here is the main issue. If Zillow wanted to gain customers through their zestimates they would raise the estimate not lower it. After all, more people own homes then are buying one in any given moment. Telling those people how smart they are that they timed the market is a much better way to retain users.
intrasight 9y ago
I would think that Zillow would mainly be punishing themselves by not having a quality algo for home values, given that it the main draw of the site for many people.
imjustsaying 9y ago
If an algo could predict real estate prices (all of which are unique and based on instantaneous human preferences) with 100% accuracy, any arbitrary human thought would be known.
- imjustsaying 9y ago
  A driveby downvote is not a valid argument to the contrary of my claim.
vacri 9y ago
Here in Australia, underestimating by realty companies is the norm. I watched a friend go through buying a house last year, and some houses were advertised at prices that were below reserve [1]. As in, at auction, the bidding reached the advertised price, but the buyer's floor price hadn't been reached yet, so the house was not 'on the market' yet... [1] In one case, 80k below reserve. You know you've hit the reserve price, because in my state, the auctioneer is legally required to annouce the house is 'now on the market'
- chii 9y ago
  why don't they just say what the seller's floor price is, and start from there? seems foolish to auction at a starting price that's lower!
  - vacri 9y ago
    Starting at the reserve can spook some bidders and make it hard to start the auction. Starting below the reserve usually gets some momentum going in the bidding, and that tends to carry over to a higher final price. Advertising a price that's below the reserve is pretty unethical, though it's not illegal (the seller is never locked into a price). People end up wasting time and money (getting reports) for houses that were never actually in their price range in the first place.
noonespecial 9y ago
Its ridiculous here in Florida because it doesn't understand "waterfront". You may as well read tea leaves.
digitalpacman 9y ago
Thing is, all appraisers do a bad job. Evaluating a house is completely up to their opinion, and the artificially increase prices just because houses are selling. They drive prices up and down based no their will. Couldn't their job be legitimately done by a computer and a camera? Probably if the technology was there.
morganvachon 9y ago
I've mentioned it before on HN, but Zillow is vastly overvaluing my home. I paid $43k for it as a foreclosure in 2009. Today it appraises for about $60k (it's a tiny farmhouse on a half acre lot), yet Zillow constantly values it at over $80k. I believe they do this so they can bring up the average price for the houses in my area. Maybe it's good for me, I don't know, but it's dishonest.
libeclipse 9y ago
Would be interesting to calculate P(actual_value_is_near_N | prediction_is_N).
tracker1 9y ago
At's an algorithm based on available data... it may not be accurate, but that doesn't mean it's too wrong. Also, if you put in expensive features, doesn't mean your house will sell for twice as much in a given neighborhood. Pricing is fairly collective with main factors being property size, home size, bedrooms/bathrooms and some influence on features, namely pool, garage(s) etc. That doesn't mean it's entirely wrong, unless there are manual tweaks happening to shape specific markets, which may be proven/disproven through discovery. Aside from that, there's the legal aspects in different states and counties in terms of what a licensed/unlicensed seller is allowed to do. I would say that if the market is more than 20% off in terms of actual sales from the Zestimate, then there may be something up... The Phoenix market seems pretty accurate to within 5-10%, which is pretty reasonable.

193 points by e15ctr0n 9y ago

The realtors I talk to hate the Zillow estimate as it typically creates an unrealistic expectation for either the seller or buyer depending on if the algorithm over or under estimates. Apparently it's rarely correct, though I live in a unique area.

lotsofpulp 9y ago
If it's not correct, then the sale price will reflect that and Zillow's reputation will take a hit. Don't understand why the government needs to get involved in what someone says something is worth, it's their opinion and they're entitled to it. Edit: It would be funny if Zillow also started putting up alerts about problems with government finances which will likely impact future taxes, such as in Illinois.
- abfan1127 9y ago
  this is America. they are not entitled to their opinion. /s I completely agree. don't like their estimate, don't use it.
- geppeto 9y ago
  The government's not getting involved, oh you mean the fact that a judge is going to be involved? Civil courts exist to provide monetary damages if damages can be proved to exist. Yes, they can also compel arbitrary behavior as a part of governing body. This is independent of any stance on Zillow and a state licensing regime. If the plaintiff can convince that the tool is making her lose money, the judge will award her money. "but that means < cue completely uninformed legal analogy >" yes you can make a career out of litigation, many people have.
  - lovich 9y ago
    It cant just be the plaintiff proving that Zillow's tool makes her lose money, can it? If that argument was true then you could get sued and lose for reporting on facts that put the company in a bad light, like poor hygiene in a restaurant, or for competing with another company with a better product.
    - geppeto 9y ago
      you have to also show up and defend yourself. many summary judgements on flaky arguments are made just because the defendant didn't respond. the judgements are collected from you bank in any jurisdiction that will reciprocate
  - lotsofpulp 9y ago
    You're right, I shouldn't have phrased it that way. I meant to say I don't think the government should be involved. Although, I'm not sure why the plaintiff should be awarded anything, even if Zillow causes her to "lose money". Unless Zillow is doing something specifically to her home estimate, then it's merely offering a differing opinion on what they think the home is worth.
    - snrplfth 9y ago
      "Eyyy buddy, you wanna buy this car? Classic 1991 Honda Civic, only 100k miles on it, and most of the doors still open. I'll give you a deal, $10 000." "Yeah, I don't think it's worth that much. A hundred dollars, tops." "Did you just appraise this car? Oh, you done messed up." muffled sound of approaching police sirens EDIT: Hah, didn't see you'd used the exact same analogy elsewhere.
  - deleted 9y ago
    [deleted]
  - thaumasiotes 9y ago
    Nonsense. For the judge to award your money to a complainant, they need to have a loss and you need to be legally liable for the loss. The fact that they have a loss is not itself a cause of action. The fact that you caused the loss is still not a cause of action.
- IanDrake 9y ago
  It seems to be a civil matter so far. The problem is, you'll never get to establish a sale price if the seller thinks his house is worth 100k over market or a buyer thinks the seller is asking 100k over market because that's what they saw on Zillow. Further, when zillow gets the estimate of a house wrong it costs them nothing, but there are real costs to Zillow's bad estimates to buyers and sellers.
  - dragonwriter 9y ago
    > It seems to be a civil matter so far. A "civil matter" is where the courts—a part of government—apply law—created by government—to non-crimes disputes, often (as in this case) between private parties. It absolutely does not indicate the absence of government involvement, even if the government isn't a party to the litigation.
  - lotsofpulp 9y ago
    If Zillow gets the estimate wrong, then people will stop using their estimates, costing them in reputation and perhaps dollars down the line. There are so many sources of info for house value that I don't see how Zillow could single handedly be manipulating a house's sale price. If it's not selling for what the homeowner thinks it's worth, it's probably not worth that much.
- tyingq 9y ago
  >If it's not correct, then the sale price will reflect that and Zillow's reputation will take a hit. Perhaps with that buyer and seller. I believe, though, that Zillow rewrites historical estimates when they get new data. So you can't really see how wrong they were after a sale.
  - BeetleB 9y ago
    They do have an Excel sheet that indicates their accuracy for each county. Eye opening.
    - tyingq 9y ago
      Current accuracy, or full historical accuracy? I am surprised they open that kimono voluntarily.
- mywittyname 9y ago
  It's still a price anchor. If an engineer at Zillow manipulated the Zestimate on a home they were trying to buy or sell, would they succeed in driving the price of the home in the desired direction? I think so. Clearly real estate agents have the same feeling or they wouldn't be suing.
  - rejschaap 9y ago
    Mostly because they want to do the manipulating of estimates themselves.
aaroninsf 9y ago
It's somewhere between comical and meaningless in San Francisco. The operation of the algorithm is painfully apparent and AFAI most heavily weights trailing sale price per square foot and sale price over list, as compared to presumed 'comps,' all three of which factors are frankly piss-poor indicators in this market and city. As a proxy at a glance for such comps it's at least an indicator of when (as is common) list price is far below expected sale price, and an arguably cruel fiction designed to attract interest (in my tier: from the desperate). (If you don't live in SF, sales at 30-50% (100s of K) over asking are common again, after a brief cool down at the beginning of this year.)

natoliniak 9y ago

Interesting. I wonder what would her argument be if Zillow simply reported the City/County tax assessors estimates which are usually even lower than Zillow's.

twoodfin 9y ago
Zillow does/did record that information, though for my house it hasn't been updated (at least on the public website) since 2014.
BeetleB 9y ago
>I wonder what would her argument be if Zillow simply reported the City/County tax assessors estimates which are usually even lower than Zillow's. County assessors for tax purposes are explicitly not trying to determine market price. Zillow should ignore it.
- leftandright 9y ago
  I'm not sure what you mean. In Illinois (the state from the article) the assessor is calculating the market value: Most real property in Illinois must be assessed based on its value on the open market, or its “market value.” This value is the amount at which a property would sell in a competitive and open market... [1] [1]http://tax.illinois.gov/Publications/LocalGovernment/PTAX1004.pdf http://tax.illinois.gov/Publications/LocalGovernment/PTAX100...
  - BeetleB 9y ago
    Then it likely varies from state to state - or county to county. See http://www.investopedia.com/articles/tax/09/calculate-property-tax.asp http://www.investopedia.com/articles/tax/09/calculate-proper... for different methods used. As an example, some places merely look at the cost of replacing the house if destroyed.
  - skwirl 9y ago
    That's not how it worked where I grew up in Upstate New York. The assessed value was a number way below market value, but assessed values among different houses pretty much differ by the same proportions as the actual market values. I do not know why it is the case.

cavanasm 9y ago

I wonder how many other tech companies fit into this general category of "providing an equivalent to a regulated service without meeting the regulations". You've got the more obvious "sharing economy" type things which are in the news all over the place lately, but I bet there are a bunch of other companies like Zillow that have been flying under the radar for a while.

jdavis703 9y ago
Since when is providing a housing estimate a regulated activity?
- mbroshi 9y ago
  This is from the article: "...the fact that they offer market-value estimates and 'are promoted as a tool for potential buyers to use in assessing [the] market value of a given property,' shows that they meet the definition of an appraisal under state law. Not only should Zillow be licensed to perform appraisals before offering such estimates" It can be surprising when seemingly innocuous activities are in fact heavily regulated (cf. Stanford needing to remove all their learning videos from their website).
  - ChairmanPao 9y ago
    Berkeley. But never let the Truth stand in the way of a good story, especially on hacker news.
  - wuliwong 9y ago
    I don't believe the article is correct in the definition of appraisals. A valuation or an approximation of value by impartial, properly qualified persons; the process of determining the value of an asset or liability, which entails expert opinion rather than express commercial transactions. http://legal-dictionary.thefreedictionary.com/appraisal http://legal-dictionary.thefreedictionary.com/appraisal
    - 9y ago

scottshea 9y ago

It would be great to see how Zillow stacks up to the desktop assessment software used by various mortgage companies and banks.

cmiles74 9y ago
Zillow's estimates are famously unreliable. https://www.washingtonpost.com/news/where-we-live/wp/2014/06/10/how-accurate-is-zillows-zestimate-not-very-says-one-washington-area-agent/?utm_term=.348539c6538e https://www.washingtonpost.com/news/where-we-live/wp/2014/06...

tabeth 9y ago

You would think real estate would prove to be one of the few real life fields where machine learning would be able to predict the prices pretty accurately. You have: 1. List price 2. "Favorites" on the MLS. 3. Square footage 4. Bedrooms 5. Bathrooms 6. Sold price for nearby properties 7. Sold price for nearby properties relative to their list price And the list goes on... Is it that difficult to predict? Literally there are hundreds of other features that have a clear correlation to the sell price (amount of people who attend the open house, crime, proximity to busy street, etc.) that I'm not including. I guess the problem is, there's not any money in having an accurate prediction.

mattkrause 9y ago
If you want to try it, there are a few data sets kicking around, including a) https://www.kaggle.com/c/house-prices-advanced-regression-techniques https://www.kaggle.com/c/house-prices-advanced-regression-te... b) http://www.bis.org/statistics/pp_detailed.htm http://www.bis.org/statistics/pp_detailed.htm c) https://archive.ics.uci.edu/ml/datasets/housing https://archive.ics.uci.edu/ml/datasets/housing If you had a really great model, you might be able to make some money with it--find underpriced (per the model) houses, buy them, and then try to sell them at the model's price.
- tyingq 9y ago
  I imagine it's tricky because value per square foot varies quite a bit in adjoining neighborhoods. And sometimes within a neighborhood. And neighborhoods aren't necessarily well defined geographically. And, some neighborhoods go long periods of time without any houses being listed or sold. So the whole idea of "comparable sales" is shaky.
  - natoliniak 9y ago
    > value per square foot varies quite a bit in adjoining neighborhoods. And sometimes within a neighborhood The quality or rather "reputation" of the assigned public school is probably the best predictor of this variance. The problem is that the school's reputation can diverge from the official grades, so this is difficult to quantify.

strictnein 9y ago

The Zillow estimate used to be spot on in our neighborhood, for several years even. Recently they all plunged to 10-20% below market value, even though all sales data puts it at the previous mark. The weird thing is that they also went back and recalculated old "Zestimate" data as well. On April 2nd the estimate for our house was $617,453, which is more or less what it would sell for. It had been above $600k since June, 2016. This month it was $544k, and there's no sign it ever got above $580k in the historic graph. It claims it was $546k on March 31st. One thing I did notice was a new button underneath the estimate: "I disagree with my Zestimate" which, surprisingly enough, is a lead gen for realtors, not a method to try and get them to change.

colordrops 9y ago
I live in a hot real estate market (L.A.), and I've spent about 5 minutes (no exaggeration) looking online at the prices of houses in my neighborhood, knowing the actual closing price of recent sales, and my first thought was that prices were about 10-20% below market value. It's funny that this is obvious to someone like myself who has spent virtually no time dealing with real estate, let alone people heavily entrenched in the process.
- WaxProlix 9y ago
  This is the same in Seattle, where a house's asking price can be 550, its zestimate (or Redfin estimate) will be around 570, and the price it actually goes for invariably ends up around 700. This has been the case for months, and it can almost seem like some sort of conspiracy between realtors and these meta-agencies to game the market. There are plenty of comps that show prices are WAY above what the 'estimates' show, and yet these professionals are seemingly oblivious. Fear of another 2008? Too much success drumming up bidding wars by underpricing? Whatever the reason, it's pretty infuriating as a buyer because it creates a sort of information asymmetry which makes a major decision really painful.
  - tehlike 9y ago
    Yes. Some known realtors underprice the property to start bidding war. The foreign money in the hot markets also doesnt help. It sucks to see a house list for 2.9m and sell for 3.7. it happens quite often here in the bay.

MichaelBurge 9y ago

This is as ridiculous as suing Nolo for publishing law books without a license. The only reason why the government needs to have an appraisal license at all is because the government handles the loan for the house. The goal is to mitigate the risk to the government, not to help consumers decide how much they want to pay.

JustSomeNobody 9y ago
Or it is to minimize the number of cases that go to court with people squabling over how much something is worth.
- deleted 9y ago
  [deleted]

inetknght 9y ago

Someone fighting back against Silicon's Valley nonsensical idea of ignoring laws? This will totally end well! /s

bunkat 9y ago
Zillow is a Seattle company, or are all tech companies just considered to be part of Silicon Valley now?
wuliwong 9y ago
Like someone else said in another thread. It is not clear to me that giving out an opinion as to the value of a house is illegal.

ChairmanPao 9y ago

It's showing my house as $1,961,232. I think that's way too high.

mr_tristan 9y ago

You can find estimate calculators from various banks, realtors, etc. I just did a basic google search and checked out estimates from Zillow, Chase, and RE/MAX, and they range from 4% under my home price to 11% over. That's a pretty crazy range of guesses. My question is: why aren't these other home estimate calculators subject to being sued, then? (And when I checked out Zillow, I noticed there was a direct link to "I disagree" next to the Zestimate. None of the other calculators had any kind of feedback mechanism.) Seems like the journalist here forgot to mention that home estimates are pretty common and come from many different sources.

strictnein 9y ago
The "I disagree" button is a lead gen for realtors, not for you to give them feedback.
- yellow_postit 9y ago
  Is there evidence they do zero tracking of clicks on that link for model eval.? It seems much more likely it's a case of lead gen and feedback.
mcguire 9y ago
'Hasn't been sued' != 'Won't be sued'. Zillow is the most popular and have been pushing it in their advertising.

joezydeco 9y ago

I'd also like to know how or why Zillow lists houses that are "pre-foreclosure". I know it's semi-public record, but that certainly doesn't help the homeowner try and recover maximum value for their property if they decide to sell. On top of that, it's pretty unnerving when you see this pop up for one of your neighbors and good friends. Nobody should have to go through even more humiliation than they already are.

narrowrail 9y ago
If you ever hover over the URLs, Zillow is using a 3rd-party service for the forclosure potential properties. It's lead gen, and you have to become a customer to get actionable data.
- joezydeco 9y ago
  If the house goes up for sale, I can lowball the owner without ever having to buy data from that 3rd party.

narrowrail 9y ago

As long as there are already many anecdotes, I'll just add mine (I've always taken the zestimate as Zillow's working model that probably needs lots of tweaking; it's not like the MLS's are eager to give them data). Anecdote: My folks live in a golf course neighborhood where their house is not on the course, and it's smaller than the rest. However, my folks house is valued based on these extravagant golf-course side properties that are actually quite a bit more $/sqft. Zillow needs to have a human go through manually and adjust for these subtle differences, IMO. Despite dome shortcommings, Zillow is a godsend compared to the systems local MLS's use, just the listing dates/listing removed dates/ last sold for/ days on market dates are worth a lot. Realtors can give you this info, but it is not nearly as frictionless as it could be. Zillow is still looking for that disruptive go-to-market strategy (they already have most of the tools). But, the Realtors aren't going to give up their ~$6K per transaction fees easily. They're much more connected than cab drivers.

linkregister 9y ago
Do you see Redfin eating a traditional realtor's lunch?
- narrowrail 9y ago
  This is an obsession of mine, but I'm not a professional. I dated/ lived with a Realtor for ~20mo, and I asked lots of questions about the workflow of the business. I don't think Redfin has much of an edge in go-to-market strategy. Redfin's allows for more comprehensive data (MLS access because of membership), and Zillow's allows for scalability. Sales data sometimes show 3 months lag from time of transaction and entry into the county clerk's records which gives the MLS quite an edge itself.
mcguire 9y ago
$6000 per transaction? It's usually 6%, split between the two realtors.
tehlike 9y ago
In bay area it can go up to 150k for a 2.5m$ house. Split two ways.

ProfessorLayton 9y ago

At least in the Bay Area, Zillow et al. are decent for getting a decently accurate ballpark figure in mind. A lot of sale prices are clearly put up below market to grab attention, knowing that the sale price is very likely to exceed it by a wide margin. Here in many parts of the Bay, you'll get laughed at and promptly ignored if you try and use these "zestimates" to try and put downward pressure on the price. Sellers here have many offers to chose from, leading buyers to compete not just on price, but even dropping certain contingencies to push the deal through.

hbosch 9y ago
A friend was looking at houses via Redfin. The agent told him on day 1 that he should expect to spend 10%–20% more than the online quote, as a rule of thumb. Since then I've taken "Zestimates" with ~65,000 to 100,000 grains of salt.
- Jemaclus 9y ago
  I used to work for Z, and I can confirm that the Zestimate is just that: an estimate. It doesn't know things like whether you did renovations or whether the house next door caught on fire and burned down and things like that. If something about your particular house changed in the last few years, the Zestimate is likely to be way off. That said, it's fairly good as far as comps go, and if you have an average house in the hood, the Zestimate is gonna be pretty close. Regarding the rule of thumb you mentioned, my wife and I have been looking for a house in the Bay Area, and we've determined that the listing price is just a completely made up number. We made an offer on a house that was 100K over asking price, and the sellers countered with 40K on top of that (so 140K over asking). I was like... what? You listed for X, we offered X+100K, you don't get to counter that. lol We obviously didn't get the house, and they wound up selling for 175K over asking price (+~25%). We've made several other offers, and sometimes the house goes for 50K over asking and sometimes it goes for 250K over asking. It just seems to be totally random. It's absurd. Instead, we actually rely a lot on the Zestimate and Redfin's estimate to figure out what the "real" value of the house is. Z and R tend to be roughly in the right ballpark for the Bay Area.

anonymous_iam 9y ago

The estimate for my house dropped by 25% in one month when the market was still rising. I'm assuming that the cause was the house next door which was in poor condition and was sold for about 20% below market value. The buyer put $100k into the house and is now selling it above market value ($200k more). It will be interesting to see what the zestimate for my house will be when the other house sells again. (It will probably sell within a month.)

e15ctr0n 9y ago

Realtors have always hated the Zestimate with a passion [0]. When they publicly called out Zillow CEO for selling his own home for 40% less than the Zestimate on it, Zillow magically released a superior algorithm [2]. [0] Inaccurate Zillow 'Zestimates' a source of conflict over home prices | Feb 8, 2015 | http://www.latimes.com/business/realestate/la-fi-harney-20150208-story.html http://www.latimes.com/business/realestate/la-fi-harney-2015... [1] Zillow CEO sold his home for 40% less than Zestimate | May 18, 2016 | http://www.inman.com/2016/05/18/zillow-ceo-spencer-rascoff-sold-home-for-much-less-than-zestimate/ http://www.inman.com/2016/05/18/zillow-ceo-spencer-rascoff-s... [2] Zillow Boosts Accuracy with Update to Zestimate Algorithm | June 8, 2016 | http://zillow.mediaroom.com/2016-06-08-Zillow-Boosts-Accuracy-with-Update-to-Zestimate-Algorithm http://zillow.mediaroom.com/2016-06-08-Zillow-Boosts-Accurac...

strictnein 9y ago
[1] reminds of an interview with the founder of Ashley Madison. He was going on and on about how western cultures were so regressive and prude about adultery and sex in general. The interviewer then asked him if he had ever used his own service. This elicited an uncomfortable non-answer that basically boiled down to "No".
- allenbrunson 9y ago
  "non-answers" are never good, of course, but i can easily see a way he could give a workable answer to that question. for example, he could say that some people are trapped in loveless marriages they can't get out of, but he never has been, so he's not the target customer. of course i'm just playing devil's advocate, because all evidence points to ashley madison being a scam, with essentially no women on the site.
  - chii 9y ago
    > with essentially no women on the site. I would have thought that some gold diggers would sign up for that sweet mistress money!

mazamts 9y ago

I don't understand how you can sue someone for estimating the price of a home. Hopefully this gets thrown out

sibmike 9y ago

Surely appraisals regulation is just another instance of mortgage regulations. But is it not the over regulated mortgage market that blasted in 2008? Was it because of zestimates? Nope? Well here ya go. Let the people speak their opinion and work on their ML.

whahjdjdj877 9y ago

Our house is in the hottest part of Portland, OR, with double digit % increases in the last couple years. Last October when I refinanced, it was appraised at $455k. Zillow had it at $467k-ish. Not enough to bum me out because I also had a now former neighbor sell recently. Buyers got into a bidding war and he walked off with $15k over asking. Seems accurate to me! ;)

razwall 9y ago

Take a look at the law they're suing under, regarding licensing of real estate appraisers (http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=022504580HArt%2E+5&ActID=1368&ChapterID=24&SeqStart=500000&SeqEnd=1900000 http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=02250...). It makes it illegal to "develop a real estate appraisal" without a license. An appraisal is defined as simply "an opinion of value". So if you are driving down the street and say to your spouse, "Look at that house, it's gotta be worth a million bucks," you just committed a misdemeanor. This law as it's written has got to be unconstitutional.

jcranmer 9y ago
Illinois is a common-law jursidiction. Any judge would laugh you out of court if you claimed an off-hand comment on valuation was an appraisal.
- razwall 9y ago
  I agree. So where is the line between an "off-hand comment" that's not subject to the law, and an appraisal that constitutes a misdemeanor? Is it illegal if you post your comment on Facebook? Or on your blog where you talk about various homes for sale in your neighborhood? Or only when you start charging people money to hear your opinion? A citizen cannot look at the law and figure out if they're committing a crime, which is why I said the law is unconstitutional.
  - chasing 9y ago
    I imagine if you offer your opinion about the price in a professional context where your opinion can affect the actual value of the property then you might have to follow some rules. If you drive by a house and say "this house doesn't look like it's worth shit" you're probably not going to wind up in court after someone complains that said house is worth quite a bit more than shit and you're driving the price down. Laws actually can be vague while remaining Constitutional. Sometimes it's unavoidable. Court cases can be used to refine the edges.

CobrastanJorji 9y ago

> Zestimates are within 20 percent 89.7 percent of the time, Zillow claims. So, for an area where the homes average around $500,000, more than 1 in 10 estimates are off by $100,000 or more? That seems kinda bad.

paulgb 9y ago
Do humans do any better, I wonder? That seems pretty good for an illiquid market. (But what do I know, I've always rented)

averagewall 9y ago

Sounds like an opportunity for arbitrage that would correct the problem. If "house flippers" start using these low prices to make a quick buck, either Zillow or homeowners are surely going to cotton on and things will settle back down to fairness.

mehwoot 9y ago
But what could a homeowner do about it? If Zillow makes your house look a lot less than what it's worth, so nobody wants to buy it for the proper price, you can't do anything. That's exactly what this lawsuit is about. They're not even suing for money right now, they just want the price for their house fixed so they have a decent chance at selling it.

jartelt 9y ago

People are way too tough on Zillow. The article states that the Zestimate is within 5% of the sale price 54% of the time and within 20% of the sale price 90% of the time. That is pretty damn good considering they do not send anyone to look at the outside of homes and they do not go inside homes like an appraiser does. The problem is that people think the value of their homes is equal to what they paid for it plus some percentage gain every year. In reality, the value is just whatever a buyer is willing to pay for it. You can think your house is worth a million dollars, but it is not worth a million dollars if no one will pay that much for it.

mehwoot 9y ago
The problem is that people think the value of their homes is equal to what they paid for it plus some percentage gain every year. How is this the problem when you just stated previously that the price is 20% off from reality for 10% of people. The real problem is a shitty estimate becoming something that people treat as a real estimate. Zillow obviously state this isn't the intention, but if they act in a way that promotes it as an estimate contrary to what they state they are doing, well, people are going to get angry.

simonhughes22 9y ago

I have had both our homes (we rent one out) independently estimated and both are worth 25-30% more than the Zestimate. I live in IL like the realtor in the article. Zillow is consistently lower than other sites. The most accurate estimates for our home are on Redfin, which is almost perfectly inline with the appraiser's estimates. Zillow has a pretty overfit model IMO.

brians 9y ago
If the estimator didn't offer to buy your house, what makes you think it's accurate?
bane 9y ago
I have different problems. Zillow's estimate is about 15% higher than Redfin for us. But there's also issues with the facts each have about our home. Zillow's estimate also goes up and down by tens of thousands of dollars per week. Some weeks it'll be as much as a $40,000 swing. Keeping the data correct on the sites is also a chore, and if I don't keep on top of both sites, entire rooms or bathrooms will come and go, square footage will change and so on. Real estate agents will claim that appraisers don't go off of these sites, but buyers will use them as pricing information so it almost becomes critical for home owners to police these sites to get as favorable an estimate as possible.
blocacres 9y ago
This is the flaw here. The seller, real estate agent, banker, and appraiser all have incentives to raise the price of the home. The only person in the transaction who doesn't is the buyer. I've been working on something in this area as a side project, and have been working with the fallout of 2008 in my day job, since 2008... and it continues to this day and the lack of understanding of the incentives here is the main issue. If Zillow wanted to gain customers through their zestimates they would raise the estimate not lower it. After all, more people own homes then are buying one in any given moment. Telling those people how smart they are that they timed the market is a much better way to retain users.

intrasight 9y ago

I would think that Zillow would mainly be punishing themselves by not having a quality algo for home values, given that it the main draw of the site for many people.

imjustsaying 9y ago

If an algo could predict real estate prices (all of which are unique and based on instantaneous human preferences) with 100% accuracy, any arbitrary human thought would be known.

imjustsaying 9y ago
A driveby downvote is not a valid argument to the contrary of my claim.

vacri 9y ago

Here in Australia, underestimating by realty companies is the norm. I watched a friend go through buying a house last year, and some houses were advertised at prices that were below reserve [1]. As in, at auction, the bidding reached the advertised price, but the buyer's floor price hadn't been reached yet, so the house was not 'on the market' yet... [1] In one case, 80k below reserve. You know you've hit the reserve price, because in my state, the auctioneer is legally required to annouce the house is 'now on the market'

chii 9y ago
why don't they just say what the seller's floor price is, and start from there? seems foolish to auction at a starting price that's lower!
- vacri 9y ago
  Starting at the reserve can spook some bidders and make it hard to start the auction. Starting below the reserve usually gets some momentum going in the bidding, and that tends to carry over to a higher final price. Advertising a price that's below the reserve is pretty unethical, though it's not illegal (the seller is never locked into a price). People end up wasting time and money (getting reports) for houses that were never actually in their price range in the first place.

noonespecial 9y ago

Its ridiculous here in Florida because it doesn't understand "waterfront". You may as well read tea leaves.

digitalpacman 9y ago

Thing is, all appraisers do a bad job. Evaluating a house is completely up to their opinion, and the artificially increase prices just because houses are selling. They drive prices up and down based no their will. Couldn't their job be legitimately done by a computer and a camera? Probably if the technology was there.

morganvachon 9y ago

I've mentioned it before on HN, but Zillow is vastly overvaluing my home. I paid $43k for it as a foreclosure in 2009. Today it appraises for about $60k (it's a tiny farmhouse on a half acre lot), yet Zillow constantly values it at over $80k. I believe they do this so they can bring up the average price for the houses in my area. Maybe it's good for me, I don't know, but it's dishonest.

libeclipse 9y ago

Would be interesting to calculate P(actual_value_is_near_N | prediction_is_N).

tracker1 9y ago

At's an algorithm based on available data... it may not be accurate, but that doesn't mean it's too wrong. Also, if you put in expensive features, doesn't mean your house will sell for twice as much in a given neighborhood. Pricing is fairly collective with main factors being property size, home size, bedrooms/bathrooms and some influence on features, namely pool, garage(s) etc. That doesn't mean it's entirely wrong, unless there are manual tweaks happening to shape specific markets, which may be proven/disproven through discovery. Aside from that, there's the legal aspects in different states and counties in terms of what a licensed/unlicensed seller is allowed to do. I would say that if the market is more than 20% off in terms of actual sales from the Zestimate, then there may be something up... The Phoenix market seems pretty accurate to within 5-10%, which is pretty reasonable.