Zestimates, How Accurate Are They?

 

Zestimates vs. Reality in Sandy Springs Georgia

Zillow is a great idea.  Be able to value every house in America.  Just type in your address and it will give you a Zestimate, an estimation of what your home is worth.

It's kind of like Google.  They have a secret computer algorithm the pulls data from a variety of sources and spits out a value.  But how good are their numbers?

They make it seem like they are very precise.  They give values in $500 increments.  They send you an email every month with updated pricing.  It makes you believe that they are pretty reliable.

I figured it was easy enough to do a quick analysis in my local market of Sandy Springs.  I took the last 12 sales for the past month and compared the Zestimates with what the home actually sold for.  After all, the sales price is the only real indicator of value at any particular time.  It's a willing buyer giving real cash to a willing seller.

Here is my spreadsheet:

Look at that error range in column C.  Zillow was under the actual price by as much as 72% and was above the actual sales price by as much as 38%.  They were off on average by 23%.

Think about that for a second.  That's a pretty big error range.  For a $400,000 home, a 23% error range is from $308,000 to $492,000. 

Zillow does have some nice charts of historic prices by zip code and area.  Maybe the exact prices are off but the general trends seem to be pretty accurate.  You can go back up to 10 years.

Tim Maitski

404-216-0472

September 30, 2010