We’ve written in the past that Zillow’s success in iBuying is in part dependent on the credibility of the Zestimate. That’s because pricing transparency is core to the iBuying experience, given homeowners initially anchor their decision to sell based on price.
To better track the credibility of the Zestimate, along with incumbent market forces working against Zillow, we have begun to monitor the percentage of listed homes that hide the Zestimate. Tracking this dynamic is worthwhile because the frequency at which home buyers and sellers see the Zestimate impacts its long-term credibility. The more you see the Zestimate, the more you believe in it.
A snapshot reveals forces working against the Zestimate
The first iteration of our tracking measures the percentage of homes for sale that show a Zestimate. A home seller, typically at the advice of their realtor, has the option to hide the Zestimate while still listing the property for sale on Zillow. For a sample of 600 homes listed on Zillow, we found that 57% showed the Zestimate and 43% did not. We believe the primary reason a seller would hide the Zestimate is if the listing price is measurably higher than the Zestimate (it should be noted that there are rare occasions in which the Zestimate is not listed because Zillow lacks adequate data. We see this most commonly with land for sale).
While hiding the Zestimate happens more often in a hot real estate market, we found the on-market Zestimate is more accurate than humans at predicting final sale price. As a reminder, there are two flavors of the Zestimate: on- and off-market. On-market Zestimates incorporate more data, and therefore, are much more accurate.
Long-term acceptance of the Zestimate is important
Put simply, we are measuring the likelihood that the credibility of the Zestimate increases over time. The tool understandably has its critics, and monitoring the degree to which the Zestimate is hidden is one way we can track its credibility. While it’s about 50-50 today, we believe AI and machine learning will improve the accuracy of the Zestimate, and whether realtors like it or not, consumers will demand seeing it. Conversely, if its accuracy fails to improve, home buyer and seller indifference will grow, and the Zestimate will become less relevant. We’ll be tracking this dynamic on a monthly basis.
Off-market Zestimates are more important
Our exercise is one way to measure the marketplace’s acceptance of the Zestimate. More important than the on-market Zestimate is the off-market Zestimate, which is rarely hidden by homeowners (our observation is that it’s hidden less than 5% of the time). The reason why the off-market Zestimate is more important is that it’s the live initial offer Zillow uses to motivate someone to sell their home to Zillow. The bad news for the off-market Zestimate is that it needs work, being less accurate than its on-market sibling. The good news is that the off-market flavor is rarely withheld.