Large shift in Zestimate, how does it work?

Question

I'm wondering if someone can help me out with this particular Zestimate:

https://www.zillow.com/homedet...

Does anyone know how you can have a Zestimate fall by 25% in such a short period of time.

I've reached out to a contact at Zillow to try to find out, but figured I'd try here too!

Richard Weinberg · Answer

@Jason Weeks

My thoughts are unfortunately darker than to suggest Zillow has become complacent and is offering bad data references.... I actually think that both Zillow and RrdFin have a new agenda as they have both entered into the purchasing and selling of real estate so that have a vested interest in reducing their acquisition costs.

I contact Zillow 3 or 4 times when they mysteriously reduced the Zestimste on one of my properties by about $40,000 and they never replied to me. In the past they were more attentive and followed up when I contacted them.

Thanks and good luck!

Chris Mason · Answer

But it's not a conflict of interest. In the past, at most, all the consumer/homeowner has ever been to zillow was the product being sold. To Realtors. Buying "leads." You as a homebuyer or homeowner have never been their customers or their clients. That's the thing that people never understood about zillow to begin with. You aren't the customer, you the human person are the product being marketed and sold. Think about that, let it sink in.

But of late, zillow "lead" quality has hit the bottom of the toilet. I know, b/c I've always gotten those forwarded emails from Realtors buying zillow's products with "hey Chris, Jackie and Billy need to get preapproved." For the last couple years, the DTIs, FICOs, incomes, down payments, etc, of Jackie and Billy have been plummeting. Realtors have been catching on, and buying less of zillow's product (humans).

So, they found a new product. Homeowners that think their home is worth less than what it's actually worth. And they are still selling that product - humans - to Realtors. The new model is that their customers, Realtors, buy the new 2.0 homeowner product. Who thinks their home is worth $400k b/c of the z-estimate. So they present Zillow's ibuyer $375k offer that can close in a week. Or, the paying customer of zillow says, "you can list it with me, I'm confident we can get $450k for it."

In reality, we're talking about a $550k home here. But the product being sold doesn't know that. They are excited about $450k. So the Realtor gets their listing agreement signed, and continues to be a happy paying customer of Zillow. Or, even better! The homeowner actually sells the $550k home to zillow for $375k.

Phew. OK, are we all up to speed on what zillow 1.0 was, and what zillow 2.0 now is? No more questions about the z-estimate number, now that we all know who zillow's customers are, and that as homeowners and homebuyers we are the products that zillow sells? Someone charge me $200 to ghost write this as a blog post or something, in my name (now I'm your customer. :P ).

Nick C. · Answer

The short answer is that it doesn't work. Unless the market dropped 25% in your area, or an even more extreme example from Bjorn, who dropped 38% in a day. To me, this is Zillow unknowingly admitting that their Zestimate is worthless.

Bjorn Ahlblad · Answer

I have a duplex that has fluctuated like crazy this year; up 38% one day. Then 2 months later 30% down; up again. I don't think Zestimates are taken very seriously. 2 years ago my primary sold for 450k above Zestimate.

Judy Parker · Answer

The Zessimate for one of my multifamily properties did the same thing. It dropped significantly this year. Zillow has mistakenly listed it as a single family house. That's one of the major problems with Zillow algorithms....they have never been inside the house so their Zesstimates are never accurate.

Jason Weeks · Answer

That's an interesting thought @Richard Weinberg, I shudder to think that that's the case, but then these days seems that companies are unwilling to examine the conflicts of interest they are creating when they attempt to enter horizontals/verticals to continue providing growth to the market!

Jason Weeks · Answer

Thank you to everyone who replied! It's great stuff to know that others have had a similar experience.

It makes sense to me that something that relies on effectively hedonic modelling but on such localised / thin volumes, would run the risk of this sort of behaviour.

Thanks again to all who wrote back!

Martin Vehlow · Answer

It's hard to know, could be local sales comps dragging it down, a change in facts that Zillow has about the property (like number of bedrooms, bathrooms, change in square footage, etc), change in valuation by the assessor, or something else. This is a great example of why Zestimate's are not worth much, it's all automated and Zillow can only know so much about a property.

Don't place too much value on this "estimate", true value is largely determined by sold comps (in the single family space) and supply/demand.

Large shift in Zestimate, how does it work?

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