Sue and Roy Carlson purchased the home in June of 2017 for just $225,000. Other real estate companies like Redfin and Realtor.com now show the value of the same home as somewhere between $268,000 and $318,000. Zillow, however, says that the property is worth an estimated $1.8 million.
When you Google the home's address, Zillow's Zestimate is the first result to show up. This causes an issue in that the first thing potential buyers are seeing is an evaluation seven times higher than the true estimate. This could immediately cause buyers to overlook this property, even though it could actually be a perfect fit for them.
“I don’t have a clue where they came up with this number,” Sue Carlson told the Seattle Times. “It’s not worth anywhere near $1 million. They’re nuts.” She added, “If anybody wanted to buy the house, they would just go, ‘Well, that’s ridiculous.’”
Carlson decided to look into the situation herself and try to come up with an answer as to how Zillow came up with its inflated value of her home. As the Times notes, “Her story offers a peek into how algorithms can go wrong, and highlights an ongoing issue with one of Seattle-based Zillow’s most popular features.”
As it turns out, Zillow admitted in 2017 that its Zestimates are generally off by around $40,000 when considering the “typical single-family home sold in Seattle.” In fact, when the company’s own CEO Spencer Rascoff sold his own house in 2016, the Zestimate was too high by a factor of 40 percent. In addition, the Zestimate of the house he ultimately purchased was off by more than $1 million.
These issues have led to some lawsuits, as well as a number of attempts by Zillow to improve its estimation process. Last year, the company launched a competition with a $1 million prize in prize to better the Zestimate algorithm. The company recently announced 100 semifinalists who have already made some small improvements to the platform.
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