Home's purchase price raises questions about Zillow's pricing estimates

Zillow, an online real estate database company, allows anyone anywhere to look up estimates on homes, including sale prices and mortgage payments.

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The site lists Zestimates for each property, or Zillow's estimated market value for an individual home. The company says a Zestimate, which is "automatically computed based on millions of public and user-submitted data points," is a "starting point in determining a home's value and is not an official appraisal." 

Zillow's CEO Spencer Rascoff recently purchased a 12,732-square-foot, six-bedroom, nine-bathroom house in Los Angeles for a little less than $20 million, while the site had estimated the home's price at $18.4 millionCurbed reported.

A headline on the Curbed story implied that Rascoff had "overpaid" for the house.

According to other media reports, a home that Rascoff recently put on the market in Seattle, where Zillow is headquarted, sold for $1.1 million -- about $650,000 under the Zestimate, The Real Deal reported, and a difference of about 40 percent.

A spokesperson for Zillow provided a statement in an email:

"The accuracy of Zillow's home estimates is well publicized," said Emily Heffter, PR specialist. "The published error rate for homes in that area is about 5 percent -- the difference between what Rascoff paid and the Zestimate is about 7 percent."

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Editor's Note: This story was updated on Friday, July 15 to reflect comments from Zillow. The headline on this story was changed Friday, July 15 to more accurately reflect the story.