How Zestimate Works

How Zestimate Works - Accuracy Is an Issue with Zestimates

Accuracy is an issue with Zestimates…

I happened to find this article, which explains the processes used to generate Zillow’s Zestimate, the estimate of residential property value: Inside the Zestimate: Data Science at Zillow

I found it interesting that they use the ‘R’ spreadsheet for doing some number-crunching, not Excel. ‘R’ is what George Dell has been demonstrating in his classes. But the graphs are generated by a different software.

Accuracy is an issue with Zestimates, according to Zillow, per the article: 

“Nationally, the median error rate is 8.3 percent, the company says.”

However, they don’t define what ‘error rate’ means. Is the Zestimate too high, or too low, by 8%? If a $450,000 home is the target, an 8% error rate difference produces a range between $414,000 and $486,000.

My ‘guestimate’ is appraisers are more accurate than that.

Excerpt from “Inside the Zestimate: Data Science at Zillow” article

If you’re like most homeowners, you probably sneak a peek at your ‘Zestimate’ from time to time to see how your home’s value might have changed….Three times per week, Zillow updates its Zestimate for 110 million homes in the U.S… The company has also gone back in time to create historical Zestimates, which help it to track how property values have changed over time and improve the current Zestimate.

The more data Zillow has on a given home, the more accurate the Zestimate, the company says. The Zestimates are usually accurate to within 10 percent in most American metro areas, Zillow claims. Nationally, the median error rate Zillow_1is 8.3 percent, the company says…

The company is also using GraphLab Create to track month over month (MOM) changes in Zestimates, with an eye for identifying “problematic Zestimates,” McClure writes in his presentation. “We now have a tool that can slice and dice the Zestimate and look at all of our data by any number of factors,” he writes…

Dave Towne
Dave Towne

Dave Towne

AGA, MNAA, Accredited Green Appraiser - Licensed in WA State since 2003. Dave Towne on

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8 Responses

  1. Jesse Ledbetter on Facebook Jesse Ledbetter on Facebook says:

    I think the most important question here is, do they include “outliers” or not? In statistical analysis its common to toss the outliers, however in this instance, one would not IF they were interested in giving an accurate picture – but no one in the real estate world has ever accused Zillow, Redfin, etc of that.

  2. Susie Buresh Hohn on Facebook Susie Buresh Hohn on Facebook says:

    Well, if we recall a week or so ago, according to FHA, 3% is too high of a variance, soooo 8% should just shut you down forever. 🙂

    • Avatar don says:

      Relocation company’s require the TWO appraisers to met within 5%, otherwise they bring in a third.

      Also relo’s are hybrid’s as they don’t use the FNMA, FHA value’s, they use future value.

      Most of the appraisals are within the 5%, they also allow a 5+ day turn and good fees.

      Is George Dell referring to (r2) R squared is a statistical check commonly used in regression analysts. All appraisers should be familiar with these checks, as they are automatic in Excel.

  3. Baggins Baggins says:

    Click bait for real estate. Know why Zillow posts higher web traffic? Big numbers!

    I’ve read on open blogs that if you log into zillow and make them aware of all your home upgrades, your zestimate will go up.

    Good boys and girls know that when you get permits for work completed, your assessed value goes up, along with your effective taxation amount. Just cut out the permit and update zillow instead? Logical fault.

  4. Baggins Baggins says:

    Perspective my dear Watson, perspective.

    Heard of the ‘instant offers’ program yet. Brace yourself, meme’s forthcoming.

  5. Avatar Gadda Gow says:

    Zestimate should be called Guestimate. 8% my ass… more like up to 35% off that I have seen directly.

  6. Taunya Richards on Facebook Taunya Richards on Facebook says:

    8 percent… Maybe in a PUD. I don’t know a single lender or peer who would tolerate me being 8 percent off! Why is it acceptable with a computer program?

  7. Is anyone paying attention to what was written?

    The admitted MEDIAN error rate nationally is 8.3%. Meaning that fully half the estimates have errors greater than 8.3% and half are purportedly less than 8.3%.

    Though WHY I or anyone else would trust those error rates numbers any more than the Zestimates themselves is worth asking. My personal belief is that in any given urban area or unique rural area, that the error rate is FAR greater than claimed.

    Now, if Zillow were claiming an accuracy rate of only 8.3%, I might be inclined to believe it. Maybe.


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How Zestimate Works

by Dave Towne time to read: 1 min