Can a machine — even one loaded with sophisticated algorithms, cloud-computing technology and real estate market data — accurately estimate the value of your home?
No way, you might say, it takes trained, professional appraisers to inspect and value houses — and even the best of them don’t always get it right. But real estate and technology entrepreneurs strongly believe that relatively accurate automated estimations of value are achievable, and they have been working for years to create systems that do just that. You’ve probably heard of or used the best known — and most controversial — version to date: Zillow’s “Zestimate” model. It allows you to go online, enter an address and get a nearly instantaneous valuation, along with property data such as square footage, numbers of bedrooms, baths, lot size and the like. It’s available for millions of houses across the country, whether they are on the market for sale or not.
But Zestimates have provoked criticism by owners, sellers and realty agents who are upset at inaccuracies in value conclusions, property data and analysis of neighborhood price trends. Zillow itself acknowledges the problem, disclosing on its website that the “median error rate” nationwide is substantial — 7.9 percent. Error rates are measured by the difference between what the automated system says is the estimated value and the subsequent selling price of the property. Median Zestimate error rates in some exurban markets, however, range much higher — 10 to 20 percent and worse.
Now, there’s a new, noteworthy competitor to Zestimates. Last week, national real estate brokerage Redfin rolled out its own proprietary model, claiming a median error rate of just 1.96 percent on homes listed for sale and 6.23 percent for all other houses. Dubbed the “Redfin Estimate,” it’s available free and covers 40 million homes in 35 major metropolitan markets. Redfin CEO Glenn Kelman says his company’s model not only offers the “lowest published error rate” available, but taps into “a treasure trove of data” provided directly by multiple listing services around the country and uses advanced cloud-computing power.
