Zillow has made some big updates to its Zestimate home valuation tool, enhancing its algorithms to allow it to react faster to market trends. The changes improve its national median error rate to just 6.9%, an improvement of almost a full percentage point, Zillow said.
Zillow’s Zestimate tool provides a quick and simple way for homeowners to get an accurate idea of their home’s value. All they have to do is enter their address and it will calculate the home’s market price based on factors such as its size, number of bedrooms and the neighborhood it’s located in, proximity to amenities and so on. It takes into account public, MLS and user-submitted data as it calculates home values based on current market conditions.
It’s a useful tool but Zillow admits it’s not perfect, hence the company’s warning that Zestimate is not an appraisal service and can’t be used in place of one.
Zillow is always looking to make Zestimate more accurate though, and said its new algorithm leverages neural networks, a new approach in machine learning, as well as a deeper history of property data that includes sales transactions, tax assessments and public records.
The neural network model tries to imitate how the human brain works. It is able to map hundreds of millions of data points and draw connections between those inputs. It then uses those relationships to predict the price of a given home, Zillow explained in a blog post announcing the update.
Due to the update, Zestimate can now react faster to dynamic market conditions, Zillow said, giving homeowners a more accurate estimate of their home’s value even in today’s hot real estate climate where rapid price gains have become the norm.
"Since we introduced the Zestimate in 2006, we have never stopped innovating in order to provide consumers with the most accurate home valuations," said Dr. Stan Humphries, Zillow chief analytics officer and creator of the Zestimate. "The new architecture we're debuting today represents another significant step forward in our efforts to harness big data to create more certainty for consumers, which leads to better decisions."
Zillow said that its confidence in Zestimate was the main reason behind its decision to start using the tool to generate cash offers on people’s homes through Zillow Offers. It’s an iBuying service similar to Opendoor, where people simply enter their home’s details and Zillow will respond with an immediate cash offer to buy the property, in case the homeowner wants to make a quick sale.
Zillow said this week’s update means the number of homes available for an instant cash offer have increased by around 30%.