If you’ve ever shopped for a home online or posted your home for sale online, you may have used an estimator service that approximates a home’s value. One of the most popular ones used today is Zillow’s Zestimate function. Recently, Zillow announced efforts to improve Zestimate accuracy.
Keep in mind that Zestimate is not an appraisal, but rather, it gives a homeowner a starting point for tracking home value—a concept that is really determined by how much a buyer is willing to pay for a home. Zestimate employs an algorithm that takes into account a combination of public and user-submitted data, including the following data points:
- Physical attributes: Location, lot size, square footage, number of bedrooms and bathrooms, etc.
- Tax assessments: Property tax information, property taxes paid, exceptions to tax assessments, other related information.
- Prior and current transactions: Actual sale prices over the life of the home and comparable recent sales of homes in the neighborhood.
- Surrounding infrastructure: Road networks, neighborhood amenities and commercial landscape in the home’s vicinity.
- Past valuations: How a home has changed in value over the years.
In addition to these, there are millions of data points that go into the algorithm to improve Zestimate accuracy—something that is evidenced by the fact that Zestimate’s median absolute error rate has diminished from 14 percent to 4.3 percent in the last 11 years. That means that half of Zestimates across the country are now within 4.3 percent of the final selling price.
What’s attributed to this improvement in Zestimate accuracy? For one, Zillow can now process three times more data than it once could. Another factor is the launch of the $1 million Zillow Prize. As incentive to improve the Zestimate, Zillow Prize invites competitors to access the Zestimate dataset to work to improve its automated home valuations for a chance to win $1 million.
The competition is ongoing through Jan. 17, 2018, when it will be narrowed down to 100 teams competing in the final round for the $1 million grand prize from Feb. 1, 2018 to Jan. 15, 2019. The goal for the grand prize winner is to build the most accurate algorithm to predict the actual sales prices of homes using innovative data sources and engineered new features.
It’s important to note that a significant portion of Zillow’s information is agent-driven, and therefore each market differs depending on agent participation. In Lee County, Zestimate accuracy is actually unable to be calculated due to low agent participation.
As Zillow makes moves to improve its Zestimate accuracy, you can benefit as a home buyer or seller. It’s important that in either situation, you work with a Realtor you trust to help you get the best deal on your home. If you’re buying or selling in the Auburn, Opelika or Lake Martin areas, call Realtor Ryan Roberts today at 334-750-9872, or email Ryan at [email protected]!
