Zillow Banned in Arizona by Regulators. Is the Novelty Wearing Off?


zillow banned arizonaInternet juggernaut Zillow is facing some opposition from the state of Arizona. According to Mashable:
The state of Arizona has issued a cease and desist to Zillow, citing that Zillow needs to be a certified appraiser in order to offer up the information the site is known for. Zillow gets their information from public documents and offers property estimates accordingly. Many in the real estate industry, including Realtors and the National Community Reinvestment Coalition, have disliked Zillow from the start, insisting that the estimates provided is often incorrect.

While I won’t comment directly about the legal matter, I will say that I am frequently asked by people about the accuracy of Zillow. It seems that most users that I’ve spoken to think they are getting an appraisal of their property, regardless of what Zillow says. It seems that perception has led to reality. If people think they are getting an appraisal, then they are getting an appraisal.

I believe the only way for Zillow to stop this perception is to be very clear about what they offer. I believe the site must place a visible disclaimer to let people know that their Zestimates are not appraisals, but calculations made using their own, proprietary algorithms. This should be front and center on the site and should also appear with any and all calculations. Otherwise, it is understandable to see why people look at their valuations as appraisals.

In order to get a true appraisal on a property, you need human judgement. There is an art to an appraisal, which can’t be replicated by a website. With tens, if not hundreds of millions of dollars, Zillow has the financial power to fight this C&D order . . . I guess time will tell what the result is.

Regardless, I think we’ll continue to see battles fought over what a legal appraisal is and I suspect Zillow won’t listen to my suggestions anyway. They have grown in popularity exponentially because of the perception they have created . . . if not, the site would have been nothing more then yet another novelty act.

(Material’s original source: The Columbian)

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.


  1. You hit the nail on the head Joshua. Those in the know & those that bother to click the links to see the disclaimer realize zestimates are not appraisals. However, the disclaimer ought to be PROMINENT and CONSPICUOUS. Cleary, as you indicate, zillow would rather not have it that way and benefit from ANY misconception about their zestmate. They keep it a link away for this reason. This has been an issue since day one.

  2. Hi, it’s David from Zillow,

    If you visit Zillow.com you should noticed that we clarify the fact that the Zestimate value is no substitute for either a CMA or an appraisal. We do so on every single page of our site via a link to an article that explains “What’s a Zestimate value”. Here’s that article: http://www.zillow.com/howto/Zestimate.htm. We also provide a link to that explanation as well as detailed measurements of Zillow’s accuracy in the search box on the home page. You literally cannot search for a house on Zillow without being presented with the information you discussed. Zillow’s accuracy metrics are here: http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm..

    Here’s an update on the AZ issue;
    Zillow has received two letters from the AZ board of Appraisers and we disagree with their suggestion that Zillow.com is providing appraisals. That assertion is simply false; Zestimate values on Zillow are the output of our proprietary automated valuation models (AVM) and are not the result of an appraisal. We hope to clear up this confusion soon and are focused on productively resolving this matter with the AZ Attorney General’s office.

    AZ Zestimate values and more can be found here: http://www.zillow.com/search/Search.htm?addrstrthood=&citystatezip=az&GOButton=

  3. David,
    While I respect your company’s take on things, if your users believe that your company is providing appraisals, then you are being ineffective in spreading the message that your company is not providing appraisals.

    Since that disconnect is one of the reasons your site has grown so quickly, I’m pretty sure that you prefer it that way. Who wouldn’t? Let the public think what they want as long as they keep coming back, right? People think they are getting appraisals because that is what they are saying, right? The confusion you speak of exists because you alow it to exist.

    Your disclaimer page / link is clearly not good enough in letting people know that your valuations are not appraisals; If you were serious about doing so, you would have a disclaimer clearly written somewhere on your front page . . . There is no such disclaimer anywhere on the page.

    Maybe my solution is not the right one, but I know one thing, unless you do something to change the perception, people will continue to think you’re offering appraisals and the C&D orders & confused consumers will likely continue to present themselves.

  4. A Zestimate is clearly not an appraisal, BUT, you are right, Joshua, the public does not understand that at all. Lately it seems that almost every new listing I take includes a discussion about why the information they took from Zillow is radically wrong. In their defense, Zillow has said that their data in Michigan is incomplete, but in most cases the damage is done and nobody reads the fine print. I think Zillow has some fantastic features, but not as a gauge of the market value of a Michigan home.

  5. Jessica Beganski on

    While real estate professionals understand that a Zestimate is not an appraisal, consumers do not. Not only have clients of mine referred to Zillow to make buying decisions but I just read with horror this past week in my local paper that a taxpayer was suggesting that towns cease hiring appraisers to do property valuations.

    Furthermore, the writer suggested residents use Zillow’s Zestimates to fight their town’s property valuations. Obviously, she had not read the site to find that Zillow gets its information from the town and my paper is so clueless that they published it.

    My point is that people are not reading the disclaimers, they do not understand how the figures are calculated and they are making important decisions based on this info.

  6. It’s late, I’m tired, so random thoughts….

    On my own house my Make Me Move price is just 75% of my zestimate. 🙂

    Honestly the fact that AZ appraisers are trying to shut them down just lends them even more public creditability that it is an appraisal.

    If a zestimate was called a CMA would we even be having this disscussion?

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  8. Pingback: Arizona Appraisers vs Zillow, Mortgage Brokers, Real Estate Agents, and The Constitution at mortgage news, tips

  9. Good thinking here folks. I am sure that 100% of us in real estate have come across buyes that want the zestimate not the listing price. Maybe we should move to calling them Zistings not listings. Lar

  10. Jessica Beganski on

    I wish I did have a link. It was a letter to the editor in the April 15th edition of The Hartford Courant. I wish I had saved the paper because it was a very real letter written by a resident of Enfield, CT.

    I agree that town assessments are not great. They are performed by companies who are usually out of state and have never seen the property. If we’re going to say town appraisals are inaccurate, doesn’t Zillow draw much of its analysis from town records?

  11. My experience has been that the public will believe what works in their favor. Clients informed me that based on Zillow Mr. Doe was the owner and he had bought the property from HUD. Based on tax records (sale was 6 months ago so Zillow had not caught up) Mr. Investor had bought the house from HUD. They also thought the house was worth $$ which gave me the opportunity to talk about the difference between market value vs. tax value vs. appraised value, etc. Values differ by who is doing them and the purpose of the valuation. Machines cannot give good valuations. Humans can.

    My personal experience on my former residence and the one I live in now was that Zillow was off by too much to use it as a valuation of any kind! If John Q. Public sees a Zestimate for 200,000 on a house with a market value of 175,000, which one do they think they will choose? It immediately puts agents on the defensive to have to explain the truth behind their numbers and why the house should not be listed at 200K. It’s no wonder Zillow is unloved!

    I’m with Jonathan Dalton. If AZ is going against Zillow, why are they not also pursuing the other AVMs?

  12. Hi all, it’s David again –

    4,1 Million buyers, sellers and others visited Zillow last month — it should not surprise you that Zillow and Zestimates comes up in your conversations with these folks!

    Please do read Jay Thompson’s post. He’s absolutely right; AVM’s are not appraisers and the ramifications of changing that definition are very far reaching — way, way beyond Zillow’s Zestimates.

    Lar is correct — some sellers and some buyers will quote a Zestimate value in negotiations. But negotiations are nothing new to real estate – if it’s not the Zestimate, sellers and buyers will quote odd-ball comps, appraisals, tax assessments or whatever they can to support their opinion. This is not a new phenomenon.

    A competent realtor should not battle to successfully explain the difference between an AVM’s estimate and a CMA or appraisal to a reasonable person. The most common mistake I see many many realtors make is to try to win that argument by criticizing Zillow – that won’t convince anyone that you know what you’re doing. However, if you focus on the fact that an AVM has never visited the property and is not privy to local market discussions, you should easily convince the consumer without having to get defensive. If you welcome this discussion, it should present you with a great opportunity to prove your expertise to your client. When you’re defensive however, you lose credibility with the client. This is just common sense but it’s a mistake I see all too often.

    Joshua –

    Your suggestion that Zillow is intentionally exploiting consumer ignorance is both false and insulting (to both Zillow and consumers). Please re-read my earlier comment. Zillow is serious about educating visitors to our site – if you have any constructive suggestions or any data to support your opinion, please let me know.

    Jessica –

    That’s a funny story (do you have a link to it). That said, public records and assessments are wrong more often that most homeowners realize and the transparency that Zillow brings to that issue is clearly a public service.

  13. Like a lot of Real Estate bloggers, I’ve posted some comments about Zillow and most recently their situation with the AZ Board of Appraisal. For the most part I agree with David G’s comments above.

    One important distinction (I’m not sure it’s been made?) is that each state can differ in what they define as a “valuation service” and who can provide that service without being licensed by the state.

    I’m not from AZ, so I don’t KNOW what their licensing laws are with regards to who or what (automated valuation model) can go un-licensed in their state?

    As an appraiser, I look at Zestimates as fun, possibly interesting to discusss at party’s, and maybe even a “consumers” cross-check against other valuation opinions.

    Sort of like getting your blood-pressure checked by the machine at the local grocery store? Know what I mean? You don’t know how it works, if it’s been calibrated, and to what standards it should be held to? STILL, if it gives results similar to your assessed value, recent appraisal, or CMA . . .and it’s consistent . . .it’s good for its intended purpose.

  14. Heh, heh . . .I sort of mixed my metaphores. Correction . . .

    “Sort of like getting your blood-pressure checked by the machine at the local grocery store? Know what I mean? You don’t know how it works, if it’s been calibrated, and to what standards it should be held to? STILL, if it gives results similar to your doctor, recent hospital visit, or home machine. . .and it’s consistent . . .it’s good for its intended purpose.”

    In the case of Zestimates: If they give results similar to your assessed value, recent appraisal, or CMA . . .and it’s consistent . . .it’s good for its intended purpose.

  15. David –
    BiggerPockets has long acted as a conduit of our users perceptions in dealing with real estate and real estate services. It is in that spirit that my article was posted. It appears as if, based on communications from our users as well as others who have used your service, that there is a very real “perception” that your valuations are appraisals.

    It is that “perception” that I have highlighted and that you as a company need to deal with. In the post, I suggested one way to do so (using a clear, prominent disclaimer), but I’m sure there are plenty of other ways to go.

    I’m sure that you appreciate the efforts that we’ve gone through to bring this matter to your attention so it can somehow be dealt with.

    We’ve started a thread to discuss the matter on our forums, and it has actually been very interesting to follow. There has been a lively debate and I think you would appreciate many of the points being raised. To follow it, go to:

  16. Pingback: Zillow gets a “cease and resist” order in Arizona | Rain City Guide | A Seattle Real Estate Blog...

  17. Zillow loves this controversy, I’m sure. The more controversy, the more hits to its site, the more $$ it makes.

    Lighten up! It’s a parlour game, a trick, a sticky advertising website with some neat numbers and figures backed up with statistics. It’s not REAL, it’s a novelty, like the guy at the county fair who tries to guess your weight. It’s all for fun and advertising dollars. It’s a tool to use when it’s in your favor and a site to ignore when it’s not. If “consumers” (I can’t believe I’m the only one who hates that word) get hurt, then perhaps they should be urged to consult a Realtor when making important buying and selling decisions.

  18. Actually Marlow I think the guess your weight guys at the fair are much better at coming up with a correct number than Zillow is. If you have to hand over too many soft toys you get moved to parking detail. And parking detail sucks.

  19. Time will tell whether or not Arizona is on to something. If they are then I guess other states will follow suit. In the mean time, Zillow is kind of laughable. In my little corner of the world, Des Plaines, Illinois, a community with so much in fill redevelopment going on so fast that it presents a major challenge to licensed appraisers, Zillow falls so short of the mark that it causes the less enlightened to panic. It actually works to my benefit when my CMAs come in tens of thousands of dollars above Zillows Zestimates.

    That being said, Zillow has never been a topic on my blog. Would I do a post about Bozo the Clown on a real estate blog? I think not. I can’t even work up the energy to do one of my rants about them. I do, however, agree with Josh. Zillow should put it right out there, front and center, that they are really nothing more than an amusing toy, designed to suck people onto their site so that advertisers will pay nice money to be imbedded there.

    Come to think about it, perhaps there is a good rant in there somewhere.

  20. Sounds like you’ve gotten your rant out already, Gene!

    Thanks everyone for sharing your thoughts. It is interesting to see the wide range of opinions here. I hope the good people at Zillow are at least taking notice of all of your thoughts and ideas.

    Anyone else with any other opions on the matter?

  21. Appraisals are a black art and can be made valued any way the appraiser desires. I had TWO appraisls of my house 8 years, with in 2 months of each other, with ZERO property changes and the appraisals were $15,000 apart with the highest coming in at $78k. (I had spent $30k on an 26×30 addition to a house I bought for 50k.)

    Zillow has done what’s required, regular people are idiots and the AZ Realtors/Appraisers are greedy protectionists.

  22. Pingback: Arizona House of Representatives Gets Zillow Off the Hook | Real Estate Investing for Real Blog

  23. even if people disbelieve what zillow may say about their property they still tend to believe what it says about a new neighborhood they are thinking about moving into. Similarly others behave the same towards their neighborhoods. I have a listing in which zillow can’t even map the property but it arrives a value about $40-$50K less than the recent comp. Zillow’s inaccurate valuation creates a perception problem that the seller has overpriced the property when in fact it is in line with the most recent sale and it’s zillow which has miss priced the property. Arizona’s move is a good one, and I hope other states follow.

  24. If any outfit makes clear and disclaimers as to how it arrives at valuation guestimates, I have no problem with that. We don’t need the “nanny state” to tell us how to discuss data.

    However, I bet that if Zillow estimates were consistently on the high side, real estate agents would not be whining about them.

  25. And some people think that smoking is not harmful, even though many state attorneys general stridently disagree (although the state atty gen in the office I interned at would smoke outside of the building at lunch).

    When it comes down to it, lots of people are stupid, but when we dumb down the world to accommodate them, we make them all dumber.

    And, wait…didn’t the REAL STATE LICENSED appraisers…OVER-VALUE? And REAL STATE LICENSED real estate agents and brokers, how can I say it, stretch the truth (all the way to their own bank account)?

    I think Zillow is great, and a fun way to track the “Zestimate” on my landlord’s house (the one that I rent). From 750K to 586K (all within one year), but would I ever make an offer based on a Zestimate? No–despite public education, I have not been dumbed down by the nanny state.

  26. Very interesting. I have used Zillow before and found it very helpful in finding my current home. I’m sad to see such a helpful service go, but I think that’s a very valid argument as to why it is not as precise as it needs to be. Thanks for the interesting read.

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