From TRD New York: Zillow is offering a $1 million prize to a person or team that comes up with the best way to improve its Zestimates algorithm.
Zestimates, which is featured on Zillow’s property listing site, calculates an estimated home value independent of the asking price. The tool is wildly popular, but it is also controversial among brokers because its estimates are often far off the mark.
The company says it improved the tool’s median error rate from 14 percent when it first launched in 2006 to around 5 percent today, but that still means half of all estimates are more than 5 percent too high or too low. And the margin of error can be greater in certain locations. In early 2005, for example, the median error rate was 8 percent nationally but 11.1 percent in Manhattan.
Redfin, a real estate brokerage, has since launched a similar tool that it claims is more accurate than Zestimates, which Seattle-based Zillow disputes.
Stanford University economist Susan Athey told the New York Times that even a 5 percent error rate is low considering the complexity of the real estate market. “If individuals do not understand the market value of their property, they may pass over offers, making both buyers and sellers worse off,” she said. [NYT] — Konrad Putzier