I haven’t seen any work on the accuracy of Automated Valuation models. This article was highlighted to me in James Dearsley’s weekly newsletter on Proptech. I suppose that it had to happen eventually …Apparently Zillow (think Zoopla or Rightmove), the providers of Zestimate – their Automated Valuation Model – is being sued for inaccurate valuations. The article quotes some data on the accuracy of such models. It seems to be a fairly easy study to do given that the prices and valuations are available.
Roughly one quarter of the time, the value estimate is off by 10 percent or more of the selling price, and wrong by 20 percent or more 10 percent of the time. The 5 percent median error rate may sound modest, but when computed against median sales prices, the errors can translate into tens of thousands of dollars — hundreds of thousands in high-cost areas. Also, in some counties, error rates zoom beyond the 5 percent median: 33.9 percent, for example, in Ogle County, Ill., and 10 percent to 20 percent in a handful of counties in Ohio, Maryland, Florida, Oklahoma and Illinois.
Interesting stuff. From my experience of the valuation error studies conducted in the UK, a 5% median error rate sounds reasonable. However, there’s many more questions about bias etc. Unsurprisingly, non-automated appraisers seemed quite happy about the lawsuit.