It was bound to happen: A homeowner has filed suit against online realty giant Zillow, claiming the company’s controversial “Zestimate” tool repeatedly undervalued her home, creating a “tremendous road block” to its sale.
The suit, which may be the first of its kind, was filed in Cook County Circuit Court by a Glenview, Illinois, real estate lawyer, Barbara Andersen. The suit alleges that despite Zillow’s denial that Zestimates constitute “appraisals,” the fact that they offer market value estimates and “are promoted as a tool for potential buyers to use in assessing [the] market value of a given property,” meets the definition of an appraisal under state law. Not only should Zillow be licensed to perform appraisals before offering such estimates, the suit argues, but it should obtain “the consent of the homeowner” before posting them online for everyone to see.
In an interview, Andersen told me she is considering bringing the issue to the Illinois state attorney general because it affects all owners in the state. She has also been approached about turning the matter into a class action, which could touch millions of owners across the country.
In the suit, Andersen said that she has been trying to sell her townhouse, which overlooks a golf course and is in a prime location, for $626,000 — roughly what she paid for it in 2009. Homes directly across the street, but with greater square footage, sell for $100,000 more, according to her court filing. But Zillow’s automated valuation system has apparently used sales of newly constructed houses from a different and less costly part of town as comparables in valuing her townhouse, she says. The most recent Zestimate is for $562,000.
Andersen is seeking an injunction against Zillow and wants the company to either remove her Zestimate or amend it. For the time being she is not seeking monetary damages.
Emily Heffter, a spokeswoman for Zillow, dismissed Andersen’s litigation as “without merit.”
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Hopefully the first of many!
“He who represents himself has a fool for a client.” Quote by Abraham Lincoln.
Zillow should just rename it to “Guesstimate” and put a disclaimer in big bold letters on the page: “THIS IS NOT AN APPRAISAL, IN FACT, IT IS JUST A GUESS AND IS PROBABLY WRONG, BY A LOT. IF YOU RELY ON THIS AS AN INDICATOR OF VALUE OF THE HOUSE, YOU, WELL, YOU ARE NOT THAT SMART”
Interesting problem. Roughly, it’s almost as if a realtor put a sign on a front lawn of a house for sale, advertising the price, and a Zillow guy walks up and spray paints his lower estimate of the price on the street in front of the house. It is bound to foment discord. Any buyer will use any bargaining chip she can come up with.
On the other hand, Zillow helps home sellers who are delusional, to consider reducing their price to planet earth sensibilities.
Appraisals are opinions and they are not actionable. Unless you can show some sort of collusion in the formulation. Good luck.
Daniel, the problem is that Zillow is not a licensed appraiser, and should not be doing appraisals, particularly if the homeowner has not consented. We cannot go out as agents and list a home for a certain amount and market it as such without consent, and eventually Zillow will be made responsible for what they are doing. It makes no difference that they say they are not appraisals, if they are not to be taken seriously, why have them at all?