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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 sale

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 10y 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 10y 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 10y 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.
    - 2muchcoffeeman 10y ago
      In Australia a law was introduced where realtors had to provide realistic values for property that went to auction. Before that if you were looking at 2 bedroom apartments, around Sydney, you'd just mentally add 400k. Not sure if it's better now or not.
      - djrogers 10y ago
        The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US. The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.
        WaxProlix 10y ago
        Even without revealing the highest offer, the offers themselves constitute a silent auction, which is where a lot of the information asymmetry comes from. If I could speak to each of the other people and tell them I had X amount to spend we could all agree to walk away or make offers without going through a bunch of hassle and (for 32 of 33 offerers) heartbreak. The process really highlights to me how broken certain types of 'market' can be when there's a monopoly of information.
        deleted 9y ago
        [deleted]
        tehlike 9y ago
        What you are talking is second price auction. Winner gets the house, but pays the price of the runner-up. I wish this existed.
- jlarocco 10y ago
  > 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. I think you're completely missing the point of the tool and the last sentence in OP's post... They're getting it wrong on purpose to get signups. I really like the Zestimate tool (if it's accurate), but it's pretty sleazy for them to use it this way. Most people won't research the market price for every house they see, and as long as the Zestimate is reasonable, they'll assume the sales price is too high.
  - colordrops 9y ago
    > They're getting it wrong on purpose to get signups. No, that is my point. Well, and also that they are pretty dumb for making it so obvious.
- gozur88 9y ago
  My neighborhood is the opposite. Zillow will value a house at, say, $650k and it sells for $520k. It's not the condition of the house, either, since it's pretty consistent.
khedoros1 10y ago
For my address, it's currently showing 468k, and says that's a drop of 137k from one month ago. I'm positive that 468k is around 100k too high to be realistic. I bought for 265 in 2010, and I've been seeing units around me sell for around 350k recently. Redfin agrees with me, showing sales between 303 and 380, depending on unit size and upgrades.
jghn 10y ago
They have my house around 680K. If I were to guess what I could really sell it for I'd guess around 580K, based on a recent nearby sale. My house is a little odd and there aren't many good comps for it. At one point a few years ago the Zestimate was about 540 and my house was appraised for 450. And when we bought it 5 years ago the Zestimate was at 380 and we bought it for 420. I once heard to expect the Zestimate to be off by ~20% in either direction. That seems to be holding here.
deleted 10y ago
[deleted]
TeMPOraL 10y ago
> The weird thing is that they also went back and recalculated old "Zestimate" data as well (...) there's no sign it ever got above $580k in the historic graph. That sounds like a new level of shady.
cletus 10y ago
I just went and tried this. The Zestimate for my place is... ludicrous. Probably 30% below market value. What's more, similarly sized apartments on the same floor vary by 15%! I'd always thought this number was dumb but wow. This is even more ludicrous than I could've believed. How can it be this far off with apartments with recent sales history in a building with lots of unit (and thus lots of sales activity)? Could this be a case of them A/B testing on the Zestimate model to maximize lead generation with the "disagree?" link?
- brogrammernot 9y ago
  Highly unlikely. You do not cause this level of pricing swings in an A/B test. Additionally, A/B testing this much of a price swing heavily discounts the value of the tool.
- dagw 9y ago
  similarly sized apartments on the same floor vary by 15% Is that so unreasonable. In the building I used to live in for example the apartments on one side of the house had a beautiful view from the balcony and the ones on the other side didn't. The view side apartments consistently sold for more. I've also looked at apartment buildings where the floor size is basically them same for two apartments, but the layout was different, and people where willing to pay more for the apartments with the better layout.
surfmike 10y ago
The recalculating of the old Zestimate value is what really infuriates me.
Twirrim 10y ago
It has been at least $100k way too high in our neighbourhood for well over a year. I'm not sure quite how they go so far off, there has been a slow but steady rate of house sales around to set their data from. Consistently the Zestimate has been noticeably over the market value, and it has been annoying sellers.
cmurphycode 9y ago
I know it seems weird to have the "old" data change. But, it's not observed data, it's estimates made at a point in time. The estimate comes from the property itself as well as the algorithm. If they changed the algorithm, do you think it would be better to recalculate the old values, or show a huge swing in your home value, implying some sort of market trend or issue with your house? If I were implementing it, I think I'd have to change the old data. I'd like to think I could sneak in an explanation / comparison, but that might get nuked for usability/UI reasons.
- carbocation 9y ago
  I used to run an online service predicting college admissions. As I would update the algorithms to incorporate new results, users' predictions would change. At first, I thought people would be pleased. Soon, I discovered that people really don't like the idea of their prediction changing when they have done nothing to cause it to change. Subsequently, I would lock in the values that had been "seen" by the user, and allow them to update their prediction, if they wanted to, when new models came online. This eased a lot of the users' expressed frustration.
- devoply 9y ago
  They should be more transparent about their algo though. That would then allow users to actually know how they came to the conclusion that they did. Hopefully this lawsuit will reveal that algo.
  - michaelmrose 9y ago
    Why would the lawsuit force them to reveal trade secrets? I don't see how you have any right to know how they arrived at the number they did. I can say publicly that I value your home at $5 and my neighbor bob can say its worth a million dollars. These are both opinions and anyone seriously considering spending half a million or more can consider spending a modest amount on an appraisal.
    - wyattpeak 9y ago
ccvannorman 9y ago
If true and you can prove it, this may be valuable information in prosecuting Zillow for some pretty illegal and perverted stuff. I hope you will share this information with someone who can punish Zillow for this.
- michaelmrose 9y ago
  Punish zillow for what? Seems to be a confusion between something would benefit me/may harm me and the other side having any sort of obligation to consider your position. An inaccurate estimate from someone who you paid nothing and whom owes you nothing may make your life more difficult but this doesn't imply they owe you anything.
  - _pmf_ 9y ago
    Market manipulation is illegal. Whether or not there's a business relation between buyer and Zillow or seller and Zillow is immaterial. All the DA needs is an initial suspicion that someone related to Zillow profited from the manipulation.
    - michaelmrose 9y ago
      What market manipulation? First we haven't seen proof that zillow's zestimate is effecting real prices. Presumably after initial research stages people have an actual assessor come in before closing. Then you have to show that they profited from such manipulation rather than you know from ads. It looks more like they changed their algorithm and rather than show imaginary swings in the value of homes revised their historical projections. This makes tons of sense if you understand the historical data to mean this was what the property was worth in 2010 as opposed to in 2010 this is what we thought it was worth. In fact this interpretation is the logical one. Nobody cares what zillow thought in 2010 they care what the historical value was.
    - deleted 9y ago
      [deleted]
mattmcknight 9y ago
It's a rough estimate, but it is not always lower. A place near me was listed for $625k below the Zestimate, and is selling for 725k below the Zestimate (which was $2.4M). A below market rate sale in your area, such as a foreclosure auction, can drive automated price estimates down. A transfer of ownership to a trust, which can be at an old sale price or even zero dollar, is tough to discern in the metadata of some localities and will drive the $/sqft down. Given the many wild overestimates, I don't suspect that they are trying to have their model dampen price estimates to drive referrals. However, the price estimates at Redfin seem much more accurate, so their model could use some work.
LordKano 9y ago
I just looked at my house and I think the Zestimate is too high. I bought the house 9 years ago and the Zestimate is about $10k more than I paid. It's right in line with what the previous owner was asking when he sold it but I wasn't willing to pay that and I likely couldn't sell it for that much.

colordrops 10y 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 10y 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 10y 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.
  - 2muchcoffeeman 10y ago
    In Australia a law was introduced where realtors had to provide realistic values for property that went to auction. Before that if you were looking at 2 bedroom apartments, around Sydney, you'd just mentally add 400k. Not sure if it's better now or not.
    - djrogers 10y ago
      The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US. The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.
      - WaxProlix 10y ago
        Even without revealing the highest offer, the offers themselves constitute a silent auction, which is where a lot of the information asymmetry comes from. If I could speak to each of the other people and tell them I had X amount to spend we could all agree to walk away or make offers without going through a bunch of hassle and (for 32 of 33 offerers) heartbreak. The process really highlights to me how broken certain types of 'market' can be when there's a monopoly of information.
        deleted 9y ago
        [deleted]
        tehlike 9y ago
        What you are talking is second price auction. Winner gets the house, but pays the price of the runner-up. I wish this existed.
jlarocco 10y ago
> 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. I think you're completely missing the point of the tool and the last sentence in OP's post... They're getting it wrong on purpose to get signups. I really like the Zestimate tool (if it's accurate), but it's pretty sleazy for them to use it this way. Most people won't research the market price for every house they see, and as long as the Zestimate is reasonable, they'll assume the sales price is too high.
- colordrops 9y ago
  > They're getting it wrong on purpose to get signups. No, that is my point. Well, and also that they are pretty dumb for making it so obvious.
gozur88 9y ago
My neighborhood is the opposite. Zillow will value a house at, say, $650k and it sells for $520k. It's not the condition of the house, either, since it's pretty consistent.

khedoros1 10y ago

For my address, it's currently showing 468k, and says that's a drop of 137k from one month ago. I'm positive that 468k is around 100k too high to be realistic. I bought for 265 in 2010, and I've been seeing units around me sell for around 350k recently. Redfin agrees with me, showing sales between 303 and 380, depending on unit size and upgrades.

jghn 10y ago

They have my house around 680K. If I were to guess what I could really sell it for I'd guess around 580K, based on a recent nearby sale. My house is a little odd and there aren't many good comps for it. At one point a few years ago the Zestimate was about 540 and my house was appraised for 450. And when we bought it 5 years ago the Zestimate was at 380 and we bought it for 420. I once heard to expect the Zestimate to be off by ~20% in either direction. That seems to be holding here.

deleted 10y ago

[deleted]

TeMPOraL 10y ago

> The weird thing is that they also went back and recalculated old "Zestimate" data as well (...) there's no sign it ever got above $580k in the historic graph. That sounds like a new level of shady.

cletus 10y ago

I just went and tried this. The Zestimate for my place is... ludicrous. Probably 30% below market value. What's more, similarly sized apartments on the same floor vary by 15%! I'd always thought this number was dumb but wow. This is even more ludicrous than I could've believed. How can it be this far off with apartments with recent sales history in a building with lots of unit (and thus lots of sales activity)? Could this be a case of them A/B testing on the Zestimate model to maximize lead generation with the "disagree?" link?

brogrammernot 9y ago
Highly unlikely. You do not cause this level of pricing swings in an A/B test. Additionally, A/B testing this much of a price swing heavily discounts the value of the tool.
dagw 9y ago
similarly sized apartments on the same floor vary by 15% Is that so unreasonable. In the building I used to live in for example the apartments on one side of the house had a beautiful view from the balcony and the ones on the other side didn't. The view side apartments consistently sold for more. I've also looked at apartment buildings where the floor size is basically them same for two apartments, but the layout was different, and people where willing to pay more for the apartments with the better layout.

surfmike 10y ago

The recalculating of the old Zestimate value is what really infuriates me.

Twirrim 10y ago

It has been at least $100k way too high in our neighbourhood for well over a year. I'm not sure quite how they go so far off, there has been a slow but steady rate of house sales around to set their data from. Consistently the Zestimate has been noticeably over the market value, and it has been annoying sellers.

cmurphycode 9y ago

I know it seems weird to have the "old" data change. But, it's not observed data, it's estimates made at a point in time. The estimate comes from the property itself as well as the algorithm. If they changed the algorithm, do you think it would be better to recalculate the old values, or show a huge swing in your home value, implying some sort of market trend or issue with your house? If I were implementing it, I think I'd have to change the old data. I'd like to think I could sneak in an explanation / comparison, but that might get nuked for usability/UI reasons.

carbocation 9y ago
I used to run an online service predicting college admissions. As I would update the algorithms to incorporate new results, users' predictions would change. At first, I thought people would be pleased. Soon, I discovered that people really don't like the idea of their prediction changing when they have done nothing to cause it to change. Subsequently, I would lock in the values that had been "seen" by the user, and allow them to update their prediction, if they wanted to, when new models came online. This eased a lot of the users' expressed frustration.
devoply 9y ago
They should be more transparent about their algo though. That would then allow users to actually know how they came to the conclusion that they did. Hopefully this lawsuit will reveal that algo.
- michaelmrose 9y ago
  Why would the lawsuit force them to reveal trade secrets? I don't see how you have any right to know how they arrived at the number they did. I can say publicly that I value your home at $5 and my neighbor bob can say its worth a million dollars. These are both opinions and anyone seriously considering spending half a million or more can consider spending a modest amount on an appraisal.
  - wyattpeak 9y ago

ccvannorman 9y ago

If true and you can prove it, this may be valuable information in prosecuting Zillow for some pretty illegal and perverted stuff. I hope you will share this information with someone who can punish Zillow for this.

michaelmrose 9y ago
Punish zillow for what? Seems to be a confusion between something would benefit me/may harm me and the other side having any sort of obligation to consider your position. An inaccurate estimate from someone who you paid nothing and whom owes you nothing may make your life more difficult but this doesn't imply they owe you anything.
- _pmf_ 9y ago
  Market manipulation is illegal. Whether or not there's a business relation between buyer and Zillow or seller and Zillow is immaterial. All the DA needs is an initial suspicion that someone related to Zillow profited from the manipulation.
  - michaelmrose 9y ago
    What market manipulation? First we haven't seen proof that zillow's zestimate is effecting real prices. Presumably after initial research stages people have an actual assessor come in before closing. Then you have to show that they profited from such manipulation rather than you know from ads. It looks more like they changed their algorithm and rather than show imaginary swings in the value of homes revised their historical projections. This makes tons of sense if you understand the historical data to mean this was what the property was worth in 2010 as opposed to in 2010 this is what we thought it was worth. In fact this interpretation is the logical one. Nobody cares what zillow thought in 2010 they care what the historical value was.
  - deleted 9y ago
    [deleted]

mattmcknight 9y ago

It's a rough estimate, but it is not always lower. A place near me was listed for $625k below the Zestimate, and is selling for 725k below the Zestimate (which was $2.4M). A below market rate sale in your area, such as a foreclosure auction, can drive automated price estimates down. A transfer of ownership to a trust, which can be at an old sale price or even zero dollar, is tough to discern in the metadata of some localities and will drive the $/sqft down. Given the many wild overestimates, I don't suspect that they are trying to have their model dampen price estimates to drive referrals. However, the price estimates at Redfin seem much more accurate, so their model could use some work.

LordKano 9y ago

I just looked at my house and I think the Zestimate is too high. I bought the house 9 years ago and the Zestimate is about $10k more than I paid. It's right in line with what the previous owner was asking when he sold it but I wasn't willing to pay that and I likely couldn't sell it for that much.