Zillow,Trulia and other 3rd party sites provides
information and tools around the real estate market, including most notably
their Zestimate service, which seeks to estimate the value of any piece of real estate using
their proprietary formula.
The Zestimate is based initially on publicly available
data, including the dimensions of your home and lot as documented in public tax
records, the tax assessments themselves, and comparable sales in your
neighborhood (as well as prior sales of the home itself). Zillow uses all of
this information in an attempt to extrapolate the value of land, square
footage, number of rooms/bedrooms/bathrooms, etc., to determine an overall
value, not unlike how a real estate agent might evaluate the home and look at
comparable sales to estimate a price.
Of course, it's difficult to estimate a price for some
properties, especially if there are not a lot of comparable sales in the area
(and/or the sales are foreclosures, which the Zestimate ignores), so in reality
Zillow provides not only a Zestimate price but also a Zestimate range (which
represents a 70% confidence interval around the Zestimated price). A wider
range indicates more uncertainty either due to more volatile comparable sales
or a lack of enough comparable sales for a good baseline; a narrower range
indicates that Zillow had a strong base of information upon which to provide
the estimate.
In addition to the Zestimate provided initially, the
client can create an account on Zillow and "claim" his/her property
to correct or provide further supplemental information. For instance, if the
home has had significant interior upgrades that weren't reflected in public
records, Zillow won't know until the user supplements the information.
Similarly, a remodeling/expansion that is not yet captured in public records
might not be used in the Zestimate but could be updated by the client/user.
So how good are the Zestimates that Zillow provides?
Zillow does provide information on their data coverage and accuracy statistics
(by comparing Zestimate prices with actual transactions that occurred for those
properties). Notably, for some states where there are relatively few sales
and/or homes that have Zestimates, the data coverage is limited; in addition,
some states provide far less information in their public records. As a result,
some states like Alaska, Kansas, Idaho, and Maine have almost no coverage at
all, while other states may have Zestimate coverage in metropolitan areas but
not in more rural counties.
Where Zillow does have coverage, though, the data
suggests that Zillow provides at least "reasonable" estimates; in
most areas where Zestimates are provided at all, the median error is between
about 6% and 10%. And of course, this is across all sales of properties
that had Zestimates; if the property information has been updated by the owner
to account for details not evident in the public records, the error rate
ostensibly would be even lower.
In fact, in situations where the client firmly believes
that his/her property is worth more or less than Zillow, it's not always clear
whether the client is right and the impersonal computer is wrong, or if
Zillow's more data-intensive analysis is correct and the client is simply
providing a poor estimate!
Joseph Goodman *ABR*GRI*SRES*
The Goodman Group
C21 WMRA
615-444-7100 office
615-476-2953 direct
thegoodmangroup@me.com email
www.PossessTheLands.com Web
www.thegoodmangroupcrs.blogspot.com
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