How Good Are Zillow's Estimates?

Posted by Kirk Lindstrom Feb 14, 2007

The study by JAMES R. HAGERTY on the February 14, 2007 "Wall Street Journal"; Page D1, took a detailed look at how accurate the popular Zillow.com web site is at estimating real estate prices for 1,000 homes studied. Their conclusion was "Zillow's "Zestimates" often are very good, frequently within a few percentage points of the actual price paid. But when Zillow is bad, it can be terrible -- off the mark by more than 25% on one in 10 homes. In one case it was off by $2 million."

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KEY Excerpts:

• The Journal looked at transaction prices recorded for 1,000 recent home sales in seven states, using data from First American Real Estate Solutions, a data provider in Santa Ana, Calif., and compared those prices with Zillow estimates, which didn't yet reflect the sales. The median difference between the Zillow estimate and the actual price was 7.8%. (That was close to the 7.2% median "margin of error" reported by Zillow itself on all transactions involving homes whose value it has estimated.)
• The estimates were about equally split between ones that were too high and those below the mark.
• Zillow came within 5% of the price in a third of the transactions studied by The Journal. It was more than 25% off target on 11% of them. In 34 of the 1,000 transactions, Zillow was off by more than 50%.
• Zillow had estimated that a four-bedroom, 7,600-square-foot home in Fall City, Wash., was valued at $661,756. The home, built last year, sold in early January for $2.7 million. "If you don't visit the property, you're never going to know that it's in an exclusive, gated part of the neighborhood," says Maria Danieli, who represented the sellers. Ms. Danieli says Zillow may be fine for "cookie-cutter" neighborhoods but "they can't compute" the values of the luxury homes she sells.

The above findings pretty much matches my experience with Zillow. It is a useful tool for homes you already have a good idea what they are worth... but it is useless if you don't know the neighborhood very, very well. I'd advise using Zillow with caution.

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