Zillow’s Zany Estimates

Years after its inception, Zillow became a household name for people who wanted to purchase or sell their homes quickly without a realtor.  By providing an online database of available homes for sale using “Zestimates” for the properties, Zillow gave the general public an easy-to-use format to calculate home values. Although there has been speculation as to whether Zillow will eventually replace the need for realtors, the Patel v. Zillow case may prove otherwise.

Just how accurate are these Zestimates?

Patel v. Zillow is a class-action lawsuit that was recently filed in Illinois. The action first originated because Zillow allegedly listed the Patels’ Illinois properties for sale on its website with incorrect Zestimates of the properties’ value and without the Patels’ consent.  The Patels argue that not only has Zillow provided a flawed appraisal tool in violation of Illinois law, but Zillow purposely uses this practice to create marketing opportunities for its brokers.  Moreover, the Patels argue that this marketing ploy causes people to go on a wild goose chase to correct the miscalculation of their properties’ appraisal. Additionally, the Zillow employees are unresponsive and unsophisticated, pressuring homeowners into retaining one of the “Zillow brokers” advertised on their website.

A spokesperson for Zillow has argued that Zillow’s Zestimate tool is an automatic valuation model that utilizes public data to quickly price homes for consumers. Zillow’s spokesperson openly acknowledges that the company bases zestimates off a computer algorithm, which the Patels, a northwest homebuilder family that is the Plaintiff in this case, argue have no foundation in any recognized real estate valuation standards.

What could this mean for Zillowners?

Although the case has yet to be heard in court, it is apparent that quasi-artificial intelligence websites such as Zillow present a huge problem for homeowners. For homeowners interested in selling their property, a flawed appraisal tool could result in significant loss in the true value of their home, especially if homeowners neither posted, nor intended to post the house for sale on Zillow.

As stated in a recently published article, “A lowball Zestimate can thus drive away potential buyers and add ‘unnecessary expense’ to the sales process . . . driving homeowners into the open arms of Zillow-associated brokers.”  

The Patel lawsuit is sure to create ripples throughout the real estate community. In fact, the Patels’ action against Zillow has already spurred yet another homeowner to sue Zillow for an injunction to remove the home from Zillow’s website.  The lawsuit, Andersen v. Zillow, alleges Zillow’s Zestimate is a “sloppy computer-driven appraisal” which incorrectly appraises the home for $90,000 less than its true value. Although both cases have been filed in Illinois and will be decided under Illinois law, it will likely open doors to many Florida homeowners who have similarly been subjected to Zillow’s seemingly unreliable zestimates and seek to hold Zillow accountable.

 

From the trenches,

Roy Oppenheim.