A new study found that Zillow’s automated home valuation tool, the Zestimate, improves pricing efficiency in residential real estate transactions and delivers measurable benefits to buyers and sellers like.
The research, published in Marketing Science — a peer-reviewed journal of the Institute for Operations Research and the Management Sciences — concluded that Zillow‘s tool reduces uncertainty around home values and helps market participants make more informed decisions.
In analyzing U.S. home sales data, the authors found that the availability of a Zestimate increases buyer surplus by nearly 6% on average and raises seller profits by more than 4%.
These gains are largely attributed to sellers pricing homes more confidently, and being less likely to underprice properties or accept offers prematurely.
The study also challenges concerns that algorithmic pricing tools disproportionately benefit higher-income neighborhoods.
Instead, researchers found that the Zestimate produces larger gains in lower-income areas, where uncertainty around home values is typically greater.
In these neighborhoods, buyer surplus increased by more than 9%, compared with smaller improvements in middle- and higher-income markets.
Although researchers noted that the Zestimate’s accuracy is somewhat lower in lower-income areas, they concluded that its overall impact remains positive because the tool still reduces uncertainty.
According to the study, clearer pricing signals improve buyer-seller matching by narrowing the gap between asking prices and what buyers are willing to pay.
Sellers are more likely to wait for offers that reflect a property’s underlying value while buyers benefit from reduced guesswork, the report said.
Researchers concluded that algorithmic pricing tools can improve both efficiency and equity in housing markets when they reduce information gaps, even if estimates are imperfect.
They added that further improvements in accuracy — particularly in underserved areas — could generate additional benefits.
The full study can be found here.
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