How accurate are Zillow’s Zestimates? As it turns out, Zillow’s CEO seems to have lost faith in his companies own ability to assess home values.
Company founder and CEO Rich Barton added in his report [to investors] that “we’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”
During an earnings call with investors, Barton ultimately concluded that Zillow has been unable to accurately price homes for future sales.
“Our observed error rate has been far more volatile than we thought possible,” Barton said during the call. He later added that “fundamentally we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.”
As REALTORS®, a common issue arises when representing sellers or buyers is the Zestimate®️they sometimes rely upon to determine value for the property in question.
Invariably, we spend an inordinate amount of time explaining to our buyers and sellers that the Zestimate they see on-line has very little to do with the actual market value of a home.
The problem with Zillow’s algorithm is that while it can compare the size and age of a home using public records, location and lot size, it has an impossible task of sourcing sufficient details of a home for an accurate valuation.
For example, Zillow has no way of knowing if the homes being compared have been recently updated, and if so with what quality of materials.
Are the lots these homes sit upon all the same insofar as usability? A level ¼ acre lot is worth far more than a steep ½ acre lot but Zillow’s algorithm has no access to these important details, and it can’t differentiate between the two.
To sum it up, we tell our clients, “Zillow has never been to your home, or seen the inside. They can’t possibly know what your home is really worth—but it’s a fun app”.
The sad news is Zillow has taken down their own work force by their assumption they could use their quantitative analysis to predict home values.
The report ultimately states that Zillow plans “to wind down Zillow Offers, the company’s iBuying service in which Zillow acts as the primary purchaser and seller of homes.” CEO Rich Barton went on to say that the move should take several quarters and will also result in Zillow reducing its workforce by approximately 25 percent, according to a report Tuesday.
Quote Source: Imnan Real Estate News
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 25 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine are ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
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The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance, or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
