Thought this was a good read from CRAIN'S
A Glenview lawyer sued Zillow, alleging that the real estate site's relatively modest estimate of her home's value has created a "roadblock" to selling at what she thinks it's worth.
Zillow's estimate, known by the trade name "Zestimate," is "effectively a sloppy computer-driven appraisal" of the value of her home, Barbara Andersen says in a complaint suit she filed late last week in Cook County Circuit Court.
As of yesterday, her asking price was $626,000 for the three-bedroom townhouse, but Zillow's Zestimate was about $555,000.
"I'm simply interested in getting these people to stop opining improperly as to my personal property," said Andersen, who practices real estate law. Her suit does not seek money; she wants the court to either require Zillow to remove the Zestimate from her home's listing on the site, or to "amend it to an agreeable market value to Andersen."
Andersen argues in her suit that although Zillow's site clearly explains that a Zestimate is not a professional appraisal, it meets the definition of an appraisal under Illinois law because it estimates the value of a home and is promoted as a tool that potential buyers can use to measure a home's value.
"It gives the appearance to the public of being an appraisal," Andersen said.
Zillow, her complaint says, "should not be engaging in this business practice without a valid appraisal license and, further, the consent of the homeowner." Illinois regulations say only a licensed appraiser can provide an appraisal.
In a statement, Seattle-based Zillow said: "We always say that the Zestimate is a starting point to determine a home's value, and isn't an official appraisal. Also, we always recommend homeowners work with a local real estate agent or an appraiser to determine the best price for their home."
Zillow describes its method of creating a Zestimate as drawing on public records and a proprietary algorithm. On a page of its site that details the level of accuracy of its Zestimates, Zillow says its estimates on Chicago-area homes come within 5 percent of the eventual sale price 47 percent of the time. It comes within 20 percent of the sale price 86 percent of the time.
Andersen said she believes the process is evaluating her property using records of homes built later and "more cheaply" than hers in a less appealing section of the Glen, the redeveloped former Glenview Naval Air Station.
Andersen said that assessing her home against a different group of properties, which are larger and more expensive than hers but in the same section of the Glen, would generate a higher Zestimate.
"Their computers aren't comparing apples to apples when they do a quick spin through the records," Andersen said.
She bought the townhouse, which overlooks a golf course, for $628,500 in 2009, according to the Cook County recorder of deeds. She listed it for $670,000 in 2013, and again in 2014 for $720,000. Her price has come down $94,000 since then, to below her original purchase price.
In her suit, Andersen argues that "Zillow's improper business practice has deterred potential buyers." The complaint does not provide examples of buyers who have been turned off by the Zestimate.
Andersen has called and emailed Zillow several times requesting a change or removal of the Zestimate, according to her complaint. Zillow's spokesperson told Crain's in an email that when Andersen called in December and March, customer service representatives "responded within a day or two with some information about how the Zestimate works, reiterating that we do not manually change Zestimates. In both cases the representative wrote 'The best way to change the Zestimate is to make sure the home details are accurate.'"
I deal with homeowners who want a "Zestimate" all the time. It is so hard trying to bring someone back down to something more in line. We lose some to an agent promising them that price (Which then it sits on the market until it expires). Personally I think it is doing a disservice to the homeowner because many people believe everything they read online. Sets unrealistic expectations right from jump street.
In our area the Zestimate is very inaccurate. Often hundreds of thousands too low.
@Edward Smith You'd think a lawyer filing a lawsuit would pay for an appraisal ($300? $500?) as a way to show that she's correct. Heck, pay for three of them. At the moment it just sounds like her 'opinion' of the property value is different that the 'opinion' of Zillow. Surprise, surprise, two non-appraisers differ on the value of a property.
I can't wait for the follow-on lawsuit from someone who saw a Zestimate that was high, listed their property for sale, and then complains that they can't get their asking price and the Zestimate coerced them into listing, paying a fee to stage the property, etc.
You'd think she would sue Avvo first for asserting (through their model) that she's a 6.7 out of 10 lawyer! That's like what...a D/D+?
@Claude S. Where I am, I think it it runs pretty high. I'd love to think I'm sitting on another $200K in equity but I don't think it's realistic. I would be curious to know it's accuracy in densely populated areas vs. rural areas. Any computer model is going to get more accurate the more data you can shove in there. If it's an area with infrequent sales I wonder if it reduces the accuracy.
Saw this as well and it is about time! Zillow does a decent job at times but sometimes they are very off in either direction good for the homeowner here
I agree with Alex. Zillow "Zestimates" are garbage. I put a contract on a property a while back and the Zestimate was $29k. Wow. The appraisal came in at $51k. So much for accuracy Zillow.
When Im selling a property, I just go into Zillow and change all the details so the Zestimate price pushes higher
Does that work every time?
Zillow and all of the other real estate websites aren't that good at sold comps. I'll rather have a realtor pull sold comps or comps to see exactly what a property is worth. Now I use Zillow to get a ball park figure of how much the house it's worth. In Illinois and Indiana Zillow is often high after comps come back. I like to be precise as possible when dealing with this type of information because it could make or break a potential deal.
Indiana is a non disclosure so Zillow sucks. Two similar houses next to each other can have completely different Zestimates. One will be crazy high while the other is super low. But too many consumers rely on that data as coming from God.
My next door neighbor just sold and closed on their home yesterday. Zestimate has it at $622,000 sold for $739,000. Some neighborhoods in the area it's pretty close, not even in the ballpark where I live.
I agree. In SOME areas, Zillow's computer anazlyzed Zestimate can be spot on. But only in SOME areas. The other 90% Zillow is sometimes 20, 50, 100% off from the possible value. I agree that there should be something done about this. Yes, even though they state it is not an official estimate, uneducated sellers/homeowners on this issue take Zillow's estimate as accurate and true. Especially if the "estimate" is a lot higher than it should be. It makes negotiating a bit more difficult.
Each site that offers free on-line information provides an estimate of the value of property. Clearly this information is a guess at best. If you utilize Zillow, Redfin, Trulia etc they all have a value and they are all different. I agree, the average uninformed individual will take the information as fact. Clearly, there should be more definitive warnings about the validity of the information. Do we really need another lawsuit to tell us the information is worthless. I thought that is why we have brokers. Everything is available on-line just ask our friend Uncle Google. I'm sure the courts have better things to do then worry about whether an attorney is being wronged by information that is at best a guess. What a waste of time.
Given Zillow are the self-confessed ‘leading real estate marketplace’ with a market cap of $4.9B, and arguably the largest pool of data available to them; you’d think that the algorithms associated with the Zestimate would bring the percentage tolerance a little closer to that of its actual market value, and not the disparity we regularly witness.
However, those associated with the process of buying & selling a particular property should know it is only intended as a starting point, and shouldn’t be used as leverage in the negotiation, for or against, the listing and sale of the property.
The agent and homeowner would have a clearer indication of market conditions, location and spec of the property that is being listed. As @Russell Brazil alluded to, you have the ability to update the data within the Zestimate to make it far more accurate.
You should always seek professional advice of a qualified agent or appraiser that knows the local market, any FSBO using this as a tool to value their property or any buyer to justify their offer is fair, will always be off the mark.
Yeah, sue those guys providing free information. How dare they try to be helpful and make money off a great product.
Different states and counties have different disclosures which make finding the sale price of properties difficult. Regardless of all of this we operate in a free market. If her house was worth what she was asking it would sell. She asking too much and looking for someone to blame besides herself. I mean how could a lawyer be wrong? Ha
@Edward Smith If you really want to have some fun, look at Zillow for Zestimates for oceanfront property in San Diego. They are literally off (read: under) by millions. Yes, the "s" was intentional to indicate plural. And, no, it doesn't stop property from selling at all for 3-5 times what the Zestimate says.
I hope the person filing suit wins. Zillow estimates (all AVMs for that matter) are crap and a threat to the balance of the Force. I'm fortunate enough to live in the Bay Area where we tend to understand the limits of technology, but not everyone is so fortunate (or is fortunate enough to have a pool of buyers that knowledgeable).
@Edward Smith I am told that Zillow's model is to provide the AVERAGE price per sq ft. That is like saying a 6 foot long horse is equal to (6) 1' foot long chickens. While you can eat horse, it just isn't right and chicken tastes better.
Besides, don't they smoke a lot of dope in Seattle? "Hey man, let's make this one $649,143 whatda ya think?"
@Andrew Johnson epic response. I was literally laughing when you mentioned Avvo. On a serious note though, I agree she should have her own professional estimate done and ignore potential buyers whom only make offers in line with the Zestimate.
There's no denying that Zillow's "accuracy" is a running joke among real estate agents. Here's one of my favorite examples.
Charlie MacPherson, Clear Sailing Realty | 781‑412‑4151 | http://www.ClearSailingRealty.com | MA Agent # 9532146
There are a few limited cases where Zillow Zestimates are fairly close... But of course, there are far more cases where it is completely off the mark. My spidey sense tells me that it would be a fair compromise for Zillow to allow homeowners to completely remove any display of the "Zestimate" if they chose to do so...
Of course, however, this would lead to an "adverse selection" problem where when the Zestimate was too high, nobody would request removal. As much as we all hate mistakes, nobody complains when an error works in their favor. Humans are congenitally unable to apply objectivity, fairness and universality to their various plights.
Then the entire Zestimate complex would be systemically biased towards estimates which are too-high.
Hmmm, I always thought Zestimates were too high (and estimated rents too high also). Apparently they are too low in other areas. Does anyone try to protest their property tax assessment using the Zestimate, in cases where they underestimate the value?
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