Your guess could be as good as Zestimate

by J. Craig Anderson The Arizona Republic Feb. 28, 2010 12:00 AM

If you're wondering about the accuracy of online home-valuation site Zillow .com's estimates, a study published by the Appraisal Institute says your guess is as good as Zillow's.

The Washington, D.C.-based institute's quarterly publication, The Appraisal Journal, includes results of a study by University of Texas-San Antonio business professors Daniel Hollas, Ronald Rutherford and Thomas Thomson that compared actual sale prices with both homeowners' estimates and Zillow's valuations, called "Zestimates."

However, the way the Institute presents its findings is misleading.

An Appraisal Institute news release about the study says the three professors found "40 percent of the homes ... were overvalued by Zillow by more than 10 percent," whereas "on average, homeowners overestimate the values of their homes by 5.1 percent."

So it's 10 percent vs. 5.1 percent. That looks bad for Zillow, right?

But wait a second. The statistic "40 percent .. overvalued ... by more than 10 percent" isn't comparable to "on average ... overestimate ... by 5.1 percent."

Reading through the study, it turns out that the professors found Zillow's Zestimates to be accurate within 10 percent of the home's actual sale price 59 percent of the time, whereas homeowners' estimates were within that range 37 percent of the time.

With those success rates, neither method is going to take the world by storm, but 59 percent is better than 37 percent.

Zillow spokeswoman Jill Simmons said there are problems with the study, which uses three-year-old data from a single city.

She said the biggest problem is that it compares sales closed in 2006 to Zestimates generated in early 2007, "apples and oranges, since it's two separate periods of time."

Zillow.com is one of several Web sites that use automated home-valuation models. Others include Trulia.com, eAppraisal .com and Cyberhomes.com.

Appraisers, on the other hand, actually visit the home and inspect it personally. Many of them are getting paid less these days because of changes in the way they are hired. Meanwhile, they're getting yelled at more because sellers are often shocked to learn how much value their homes have lost.

But no one is trying to pick on Zillow, according to Appraisal Institute spokesman Ken Chitester, who said the study's authors did the work on their own and were not commissioned by the trade group.