Does Zillow hit the mark? We put "Zestimates" to the test
Seattle Times business reporter
When Catherine and Dwight Gaston put their brick Tudor on the market a year ago, there was no such thing as Zillow, the Seattle-based home-valuation Web site that's taken the real-estate world by storm.
The Gastons and their real-estate agent set a price of $635,000 for the three-bedroom home on Queen Anne, one of Seattle's most sought-after neighborhoods. With its refinished oak floors, coved ceilings, leaded-glass windows and more than one bathroom, they were sure the house would sell quickly.
But it didn't sell, which surprised and saddened Catherine Gaston.
"We loved that house, and like everyone else, we hoped there'd be a bidding war and we'd get more," she said. "But no one wanted it."
The Gastons took it off the market for a while, then tried again to sell it for $635,000, although their real-estate agent suggested $605,000 was more realistic.
Then when Zillow launched in February, it said the Gastons' house was worth $684,310 — roughly $80,000 more than their agent's estimation and almost $50,000 more than they were asking.
After the Gastons reluctantly cut the price to $609,500, their house sold immediately for full price. The Zestimate was 12.3 percent higher than the actual selling price.
Was it a fluke? The company says no, calling its site a starting point to determine a home's worth. True value, after all, is what a buyer will pay.
Some 73 percent of recent single-family home sales in the Puget Sound area came within 10 percent of Zillow's valuation, or "Zestimate," according to information posted on its site.
That means 27 percent did not, and Seattle's Zestimates are more accurate than most everywhere else, the company says.
Zestimates and selling prices are within 10 percent of each other less than 60 percent of the time in New York, Houston, Dallas, Detroit, St. Louis, Kansas City, Mo., and Tampa-St. Petersburg, Fla.
The highest accuracy is in the San Francisco area at 76 percent.
Zillow has estimated the values of more than 67 million homes nationwide. It bases its numbers on information contained in public documents, such as county assessor records, but does not make visits to homes and doesn't know what they look like inside.
That's one reason Zillow assigns homes a value range as well as a Zestimate.
The Gastons' home had a value range of $588,507 to $759,584 — a $171,077 spread.
Accuracy varies from area to area
"Accuracy depends a lot by area, and in some areas we have a lot of great data, and in some we don't have much data at all," said Amanda Hoffman, a Zillow spokeswoman. "Luckily, in Seattle we do have a good amount of data.
"But even with the best amount of data and best accuracy rate, we want to reinforce that we're just a starting point," Hoffman said. "Zillow is meant to be a research tool. It's not meant to be a crystal ball to tell you what your house is worth. It's what your house may be worth given the data we have."
In September, the site began allowing homeowners to update their home's data and correct errors, a move with the potential to make Zestimates more accurate.
A month later, the National Community Reinvestment Coalition, a nonprofit economic-justice organization based in Washington D.C., filed a complaint with the Federal Trade Commission accusing Zillow of "intentionally misleading consumers and real estate professionals" about the accuracy of its valuations.
It asked the FTC for "immediate intervention" because of the likelihood of "substantial injury to consumers."
In a prepared statement, Zillow responded: "We believe these allegations are groundless. We make every effort to explain on our site the role of Zestimates as a research tool, as well as to clearly display our rates of accuracy for every area we cover."
The FTC hasn't yet responded to the complaint.
"The commission takes these things seriously, and we will review this matter," spokeswoman Claudia Bourne Farrell said.
Zillow is the creation of two former Microsoft executives, Lloyd Frink and Rich Barton, who also founded Expedia, the online travel service. Before its inception, homeowners and buyers had no instant way to learn anonymously, for free, what a particular house is worth.
Now the site's Zestimates and such features as tax records and 360-degree aerial mapping are bringing more than 3 million people to Zillow each month, Hoffman said.
Funded by $57 million in venture capital, Zillow makes money through advertising by real-estate companies, lenders and others who provide real-estate-related services.
A look at 25 homes in two counties
In April, The Times began tracking Zillow's accuracy by saving for-sale data on 30 homes chosen at random in King and Snohomish counties.
Of the 25 that eventually sold, 12 sold for more than their Zestimate, and three-quarters of those were within 10 percent of it.
One was less than 1 percent off.
Of the 13 that sold for less than their Zestimate, nine were within 10 percent of it.
But some displayed wide disparities, including a 50-year-old Mercer Island home with five bedrooms. Zillow pegged its worth at $910,374. It sold for $1.15 million in April. In that case, Zillow's estimate was 20.8 percent lower than the value.
Its listing agent, Coldwell Banker Bain's Susan Lettengarver, said she wasn't surprised.
"I don't know how anyone could price a home sight unseen," Lettengarver said, noting that the Mercer Island house had extensive updates — new baths, a professional-quality kitchen and a new media room with custom maple cabinets, and it has views of Lake Washington and Mount Rainier. "A panoramic view is pretty hard to judge without seeing it."
When Coldwell Banker Bain agent Terry Miller prices homes, she checks Zillow, mostly she says because tech-savvy sellers expect her to. But she doesn't use it to price properties.
Rather, she looks at three months' worth of "comps," or prices of comparable properties recently sold nearby.
She says she needs at least four of them, plus four active listings and four homes that have offers but have not closed.
Those help her arrive at a base price. Miller then adds or subtracts for busy street, condition, floor plan and the quality of upgrades, if any.
"Was it an awesome kitchen remodel 20 years ago or a cheap kitchen remodel 20 years ago?" Miller said. "Those are the things Zillow will not know.
"[Still,] Zillow helps consumers answer some questions. So I think it's a good starting place."
But Windermere Real Estate agents Karen and Andrew Fortier have seen what happens when sellers put too much stock in the online evaluator.
It estimated that a North Seattle house owned by their clients was worth $500,000.
The Fortiers calculated $400,000 was the maximum that buyers would pay. A fixer or perhaps a teardown candidate, it was directly off an Interstate 5 exit.
The sellers "were so excited because they knew they were going to be walking away with $500,000," Karen Fortier said.
Then she and her husband showed them comps.
"When we gave them the reality, they were shocked," she said.
"They thought Zillow was correct."
After sitting on the market for several months, the home recently sold for less than $400,000.
"No automated valuation site will be 100 percent accurate because there's so much subjectivity in houses," Zillow's Hoffman said.
"Ultimately a home is worth what someone will pay for it."
Elizabeth Rhodes: firstname.lastname@example.org
Copyright © 2006 The Seattle Times Company