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A publication of Appraisal Journal claims that the estimates of home values on Zillow are no more accurate than the estimates of value made by homeowners. This paper is authored by a trio of University of Texas-San Antonio professors and looks at Zillow’s estimates of home values versus the actual sales prices on 2,045 single-family residential properties sold in Arlington, Texas in 2006.

Zillow obviously has issued with this report and has issued a statement. Among Zillow’s complaints are that the survey uses data over three years old and is restricted to one city, thus it is “out of date and limited in scope.” In addition, the researchers look at sales in 2006 but use “Zestimate” (what Zillow terms its price estimates) values from January and February 2007, which the company claims is “apples and oranges as it’s two separate periods of time.”

According to the paper, the average overestimation of a Zestimate is 11.67% or $15,576, which led the authors—Daniel R. Hallas, Ronald C. Rutherford and Thomas A. Thomson—to conclude, “Zillow’s magnitude of overestimation is marginally higher than the value overestimation by recent home buyers.”

The report cites data that state on average homeowners overestimate the value of their homes by 5.1% and that new owners overestimate by 8.4%. They conclude: “In most cases, Zillow should not be relied on to provide an accurate estimate of value.”

However, Zillow responded, “In the paper’s own comparison, more of Zillow’s estimates are within 10% of what the authors consider 'accurate’ (59%) vs. homeowner estimates within 10% (37%).”

In its statement, Zillow said the professors did not reach out to it to discuss its approach to home valuation, as it “would have been happy to talk to them as we are very open and transparent about both our accuracy and the intended use of Zestimates as a starting point for learning about home values.”

Mr. Rutherford stated the ideal was to get the price information as of the date of sale, but that was not possible. He also rejected Zillow’s “apples and oranges” contention.
Part of the reason for doing just one city was the data collection issue, especially in Texas, which is a “nondisclosure state,” he said.

Mr. Rutherford concluded, that unless Zillow was willing to provide access to its database, so that the researchers do not have to go through the time consuming data collection process, it is unlikely another study using more recent information would take place. The paper does state that Zillow says Zestimates are not appraisals and should be used as one estimate of market value and the company encourages getting a valuation from a professional appraiser. Zillow’s disclaimer notes that these values are a starting point.