zillow’s zestimates vs Realtor list prices

A while ago a reader wrote in responding to, and taking issue with, my post about the lack of accuracy of zillow’s zestimates > more on zestimates vs reality. (And I thought it was an important enough comment to post it here rather than let it disappear in the comments section)

And to do so he compares the original Realtor list price of each home, to what the home actually sold for, vs the median of zillow’s value range, making the point that, in fact, zestimates are a useful source of pricing information. And looked at in that light, original Realtor list prices are no better a predictor of the final sale price than the zillow value range. But is that a fair comparison. Comparing the single original list price with the median of the value range. Note that value ranges cover a lot of territory ;
(Value Range: 348k - 498k), (Value Range: $504K – $709K), (Value Range: $535K – $773K)

And there are also a couple of important differences that I can think of between zestimates and Realtor list prices.

Listing agents are in the business of doing all they can to get the highest price for their clients homes. And that’s not necessarily the same as fair market value. That is their mission, highest price/best terms, for the seller. Period. Zestimates, presumably, do not come with those marching orders. 2nd, the final decision about price is made by the seller, not by the Realtor. And, unfortunately, the reality is that in most cases, if you won’t list it for what the client wants, there are plenty of others who will. While zillow is under no such pressure. And, of course, list prices almost always come with a nice juicy fudge factor built in. And more so these days.
And one last point. While it’s true that Realtor original list prices are way off these days vs sale prices, their record is much much better in normal times. And I’ll pull and post data that demonstrates that. And I don’t think the same can be said for zestimates. 

None of that is to make light of the poor record of original list prices vs sold prices, but to point out that there are differences between list prices and zestimates.

With that said, for all you math whizzes out there, here’s what Jent had to say.

To those whom are interested in learning more about this great discussion I recommend a book written by Darrell Huff in 1954, surprisingly much hasn’t changed on the subject on which he writes. In this gem Mr. Huff discusses Confidence Intervals.

A confidence interval is “The range around a numeric statistical value obtained from a sample, within which the actual, corresponding value for the population is likely to fall, at a given level of probability” Zillow gives their interval for every property, and it usually tell the rest of the story not seen in the Zestimate regarding … well… their confidence in the algorithmic statistical guess given their underlying data set, and its timeliness to the market at hand.

I thought I would peel back the next layer of the onion on the properties discussed in this latest post and compare listing agents accuracy to zillow’s algorithim, and also provide the confidence intervals “Value Range” not previously shown in Mr. Schneder’s post.

1. 4971 E Avenida Del Cazador Tucson, AZ 85718 Zillow says - $429,000 (Value Range: 348k - 498k) Actual Sold Price - $480,000 Listed for sale by Tierra Antigua Realty 04/15/2010 @ $525k Delta from initial List Price 45k, Delta from Zillow Median 51K, Sale lies within Zillow’s Confidence Interval

3. 2300 E Corte Ingles Tucson, AZ 85718 Zillow says - $622,000 (Value Range: $504K – $709K) Actual Sold Price - $550,000 Listed for sale by Long 7/21/2009 @ 690K, then 669K, then 639K, then 565K then Sold Delta from initial list price 140K, Delta from Zillow Median, 72K, Sale lies within Zillow’s Confidence Interval

5. 3900 N Pontatoc Road Tucson, AZ 85718 Zillow says - $452,000 (Value Range: $375K – $515K) Actual Sold Price - $550,000 Listed for sale by Long 07/10/2009 @ 674K, then, 639K, then 599K, then 574K, then sold Delta from initial list price 124K, Delta from Zillow Median, 98K, Sale NOT within Zillow’s Confidence Interval ( I speculate because this home built in 1978 had been upgraded and remodeled significantly more than those in it’s immediate community)

7. 2430 E Placita Sin Lujuria Tucson, AZ 85718 Zillow says - $499,500 (Value Range: $430K – $579K) Actual Sold Price - $520,000 Listed for sale by Long 11/07/2009 @ 699K, then 649K, then 629K, then 599K, then sold Delta from initial list price 109K, Delta from Zillow Median, 20K, Sale lies within Zillow’s Confidence Interval

9. 5444 N Maguey Place Tucson, AZ 85750 Zillow says - $393,500 (Value Range: $307K – $433K) Actual Sold Price - $547,500 Listed for sale by SWS LLC @ 630K, then sold Delta from initial list price 83K, Delta from Zillow Median, 154K, Sale NOT within Zillow’s Confidence Interval (I speculate because this is the first time that this home, arguably the nicest in the community, was sold since its lot was purchased in 1991)

11. 6500 N Campbell Avenue Tucson, AZ 85718 Zillow says - $746,000 (Value Range: $552K – $798K) Actual Sold Price - $560,000 Listed for sale by Long 09/18/2009 @ 850K, then 799K, then 775K, then 725K, then 650K then sold Delta from initial list price 290K, Delta from Zillow Median, 186K, Sale lies within Zillow’s Confidence Interval

13. 4735 N Camino Antonio Tucson, AZ 85718 Zillow says - $783,500 (Value Range: $572K – $932K) Actual Sold Price - $575,000 Listed for sale by Long 05/02/2009 @ 685K, then sold Delta from initial list price 110K, Delta from Zillow Median, 198K, Sale lies within Zillow’s Confidence Interval (Which is admittedly VERY large in this neighborhood)

15. 4210 E Pontatoc Drive Tucson, AZ 85718 Zillow says - $743,000 (Value Range: $535K – $773K) Actual Sold Price - $645,000 Listed for sale by Foreclosure.com 05/21/2009 @ 645K, then sold AT LIST PRICE !! Delta from initial list price 0K, Delta from Zillow Median, 98K, Sale lies within Zillow’s Confidence Interval

17. 5700 N Williams Drive Tucson Tucson, AZ 85704 Zillow says - $527,500 (Value Range: $422K – $612K) Actual Sold Price - $680,000 Listed for sale by Great Stout 09/07/2009 @ 820K, then sold Delta from initial list price 140K, Delta from Zillow Median, 153K, Sale NOT within Zillow’s Confidence Interval .....

In the end I agree that the Zestimate, and it’s underlying data set, is a great place to start a discussion about home valuation with a local real estate professional.

Let’s hear from you.

Comments

[john schneider]

PK,
Thanks. There is no doubt that much of what they do they're doing right.
JS

[PK]

Lloyd Frink, one of the founders of Zillow talks about how you can't just count on Zillow's numbers. It is just data and nothing like a realtor's knowledge, only a starting point. FYI - They have been around for almost six years. Seems like an eternity in Internet years. Given their longevity, they must be doing something right. (grins)

http://www.youtube.com/watch?v=kfVoM6jEiH0

[john schneider]

no Jent, I am not saying 'that consumers should accept the status quo in the Foothills etc,etc.
Not at all. But two wrongs do not make a right and, guess what, no matter how well developed zillows algorithm, it's still way off base.
So use it if you wish, but at your own risk.
And I have, on dozens & dozens of occasions, pointed out that list prices are 'way out of whack' with reality. And, because they are, no one mistakes list prices for fair market value. They represent what the seller would like to get for their home. Period.

Regarding your question; "Where do you propose consumers find publicly assessable (Pre-Sale) estimated valuations on communities and houses in the Foothills?"
If you mean automated, presto from your computer, I do not propose they get it anywhere. And, in my opinion, your expectations are too high. Having hoofed it through the foothills for some years now, I do not expect that that can be done with any reasonable accuracy or consistency and zillow, who has been at it for 3 or 4 years now, proves it every single day.
And ps, it took a week because I was without internet service for 4 days.

JS

[Jent]

It has taken about a week, but I am glad the discussion has evolved to this point.

First of all let me be the first one to admit that I wasn’t trying to make a “Fair Comparison”, I was trying to make a provocative comparison, and apparently I succeeded with that intent.

It appears to me, that though you are not trying to defend or make light of the poor record of real estate listings in this market, you are able to rationalize it with decent logic and reasoning.

What I hear you saying is that consumers should accept the status quo in the Foothills that list prices of houses are inflated with a “Juicy Fudge Factor,” but at the same time be disenfranchised that a website has offered an estimated valuation of property using a fairly well developed algorithm, that leverages to its best ability all publicly assessable data, with a clearly stated confidence interval.

Just as there is a “Reality” with how the Real Estate Marketing is conducted there is a “Reality” with Zillow. The algorithm is only as good as the completeness and timeliness of the underlying data set. I believe that just as consumers recognize the reality of the Real Estate Business, and still utilize real estate professionals, they recognize the reality of the Zestimate, and still use Zillow.

Let me ask the question that I have been trying to refrain from since your first post on the 14th. Where do you propose consumers find publicly assessable (Pre-Sale) estimated valuations on communities and houses in the Foothills?

I personally don’t see any competing resources out there with the transparency, utility, and level of effectiveness of Zillow.

The days of this being a privately held secret deep within the microfiche and terminals of the MLS, to be interpreted only by licensed appraisers and assessors are over …

[Jent]

Thanks, that is a lot more readable now ! :)

[Jent]

Afternoon,

Any chance you can clean up the formatting to match the original comment and eliminate the huge single paragraph?