Forbes commented last year that, ldquo;Online home value estimators are far better than they were a few years ago but they arent comparable to value estimates made by professional appraisers. Theyre great data points for home sellers to have as long as they realize that online home value estimates are just ballpark estimates.rdquo;
Zillow says their current median error rate on pricing accuracy is 4.5mdash;more in places like Seattle, where Zillow is headquartered and where the error rate is up to 4.7, ldquo;which amounts to 35,000 on the median home,rdquo; said the Seattle Times. Still, some remain incredulous. The Balance recently took a look at four real-world sales in central California to draw comparisons with their Zestimate:
bull; One property in Midtown Sacramento had a Zestimate of 380,733 and ldquo;sold at 349,000, after almost 6 months on the market, with plenty of exposure. In this case, the Zillow estimate was about 9 percent too high.rdquo;
bull; The second was a custom waterfront property in Sacramento with a Zestimate of 983,097 that sold for 1,085,000, 10 percent above Zillowrsquo;s number. ldquo;If the sellers had >bull; House No. 3 was near the University of California, Davis. ldquo;Zillow valued that home at 1,230,563, but it sold for 1,495,000. That Zestimate was more than 20 percent too low.
bull; The fourth home, in Elk Grove sold for 565,500, 16 percent more than its Zillow estimate of 488,711.
To address discrepancies in home values and improve upon their algorithm, Zillow launched a contest two years ago that attracted data scientists from around the world.
They just announced the winners; Team ChaNJestimate, comprised of Moroccan Chahhou Mohamed, American Jordan Meyer, and Canadian Nima Shahbazi will split the prize money.
But, before you get too excited, consider this: ldquo;On average, Zillow said, the Zestimate is 10,000 off the actual sale price for a median-priced home of about 223,900, and the information gleaned from the Zillow prize winnings could shave 1,300 off that discrepancy,rdquo; said MarketWatch. ldquo;It also moves the Zestimatersquo;s national median error rate below 4.rdquo;
So, if the current Zestimate really is at 4.5, wersquo;re not looking at a ton of improvement. It begs the questions: Was it worth the million? Will we really get beneath 4? Would that be an acceptable error rate if we did?
Weigh in with your thoughts. Has this changed the way you think of Zestimates? Will they ever get to the point where they represent a real home value?
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