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Zillow Faces Lawsuit Over 'Zestimate' Tool That Calculates a House's Worth (washingtonpost.com) 231

Posted by BeauHD from the road-block dept.
According to The Washington Post, "a homeowner has filed suit against online reality giant Zillow, claiming the company's controversial 'Zestimate' tool repeatedly undervalued her house, creating a 'tremendous road block' to its sale." From the report: The suit, which may be the first of its kind, was filed in Cook County Circuit Court by a Glenview, Ill., 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," shows that they meet 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 also 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 attorney general because it affects all property 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. Houses 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, she told me.
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Zillow Faces Lawsuit Over 'Zestimate' Tool That Calculates a House's Worth More

Zillow Faces Lawsuit Over 'Zestimate' Tool That Calculates a House's Worth

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  • Let me see, would that be Oculus?

  • Solution (Score:5, Interesting)

    by 110010001000 ( 697113 ) on Wednesday May 10, 2017 @07:58PM (#54397185) Homepage Journal
    To fix this, "take ownership" of your property on Zillow and edit the property details and add an extra 1,000 sqft to it. Magically your value will go up. Thats what I did 5 years ago!

    • Re: (Score:2)

      by starless ( 60879 )

      To fix this, "take ownership" of your property on Zillow and edit the property details and add an extra 1,000 sqft to it. Magically your value will go up. Thats what I did 5 years ago!

      Maybe have to be careful that your property taxes don't go up because of this...!?

      • Re:Solution (Score:4, Interesting)

        by 110010001000 ( 697113 ) on Wednesday May 10, 2017 @08:25PM (#54397319) Homepage Journal
        It won't. Property taxes are based on the public record. You can fight property taxes, but you can't fight Zestimates. The best you can do is mess with their data (in your favor).

    • Which will probably trick their algorithms into increasing their estimate of your neighbors' properties.

  • Take Ownership! (Score:5, Insightful)

    by ranton ( 36917 ) on Wednesday May 10, 2017 @08:00PM (#54397203)

    Take ownership of the property on Zillow and at least put in the correct details. Zillow doesn't even have the square footage of the apartment; of course it's Zestimate is going to be worthless. There are no details other than it is a 3 bedroom 3 bath townhouse. This is one dumb real estate agent.

    • It is better to put in incorrect details in your favor. That will inflate the Zestimate. Zillow isn't in business to help you out.

      • Re: (Score:2)

        by ranton ( 36917 )

        While there are probably all manner of fraudulent behaviors which can help you sell a house for more if you don't get caught, it's probably better to just be truthful.

  • 1 Infinite Loop, Cupertino, CA 95014 3 beds 3 baths -- sqft Edit Edit home facts for a more accurate Zestimate. OFF MARKET Zestimate®: $1,840,871 Well. Very undervalued

  • Dead petunias in CA... (Score:5, Interesting)

    by __aaclcg7560 ( 824291 ) on Wednesday May 10, 2017 @08:40PM (#54397373)
    A roommate and I rented the front unit of a triplex in Silicon Valley after the dot com bust. I had planted some petunias in the front yard, got busy with life, and let the petunias die. While we were out in front one day, a little old lady came up to tell us that the dead petunias in our front yard lowered the value of her house down the street by $25K. I asked her if she was selling her house. She said no. I asked her how she knew that the value of her house dropped by $25K if it wasn't up for sale. She walked away in a huff.

    • A roommate and I rented the front unit of a triplex in Silicon Valley after the dot com bust. I had planted some petunias in the front yard, got busy with life, and let the petunias die. While we were out in front one day, a little old lady came up to tell us that the dead petunias in our front yard lowered the value of her house down the street by $25K. I asked her if she was selling her house. She said no. I asked her how she knew that the value of her house dropped by $25K if it wasn't up for sale. She walked away in a huff.

      These are the kind of stories I want to read!

    • Re:Dead petunias in CA... (Score:5, Interesting)

      by AthanasiusKircher ( 1333179 ) on Thursday May 11, 2017 @12:04AM (#54397975)

      That seems about as accurate a method as Zillow. I bought a house several years back (well after the big crash) for a bit more than Zillow's supposed "estimate." But the price seemed right given improvements to the interior that Zillow's broad brush algorithm wouldn't know about.

      Six months later, out of curiosity I somehow ended up on Zillow's site and looked up my house. The estimate, which was already undervalued, dropped by over 10%. Zillow lets an owner post an alternate estimate of value, so I noted the professional appraisal done before my purchase was significantly higher. A couple years go by, and Zillow keeps dropping the value of the house, even though houses in the neighborhood kept selling for similar $/sqft to what I paid. At the lowest point, Zillow's estimate was about 30% lower than the house was appraised... Even after I had provided that info.

      I was so confused about all this that I signed up for an email alert just to see what might happen. Suddenly one day there's a flurry of activity looking at my house (even though it wasn't listed for sale). And suddenly overnight the estimate is bumped up by $50,000, then more. But the weirder thing is that Zillow displays a graph of what it claims were the historical "Zestimates" for the property over the last 5 years or whatever -- and that graph was suddenly altered to erase the inexplicable and continuous drop in value that it had previously registered. So Zillow not only made huge mistakes, but they completely hid them as if they had never happened.

      Anyhow, less than a year after Zillow's value went back up inexplicably, I sold the house for quite a bit more than even Zillow's revised estimates (and made a reasonable profit, even though Zillow claimed my home value was going down for the vast majority of my time in the house).

      This was an old house in a very established neighborhood, and there were no rapid swings in value there, even when the crash happened. So, given my personal experience, I'd say Zillow deserves this lawsuit -- as a new homebuyer, I definitely paid attention to those estimates, but now I know firsthand that they can be complete BS. And Zillow will clearly hide the fact that they even made a major valuation error.

      • Just to clarify my last statements, I was skeptical of the Zestimates even as a new buyer -- but I nevertheless expected that they must give SOME rough sense of value. Now I have no confidence in them at all... Maybe within +/-30 or 40%, and at that point, why bother posting them at all? That's probably a greater error in cost than the entire range that most people are even considering.

        • Maybe within +/-30 or 40%, and at that point, why bother posting them at all?

          Because the unwashed masses uses Zillow as a starting point in their discussions about real estate values. If the realtor doesn't know about Zillow, they will find a realtor who does. Zilliow can make or break a realtor.

      • Then again, home valuation is a necessarily arbitrary thing, and even professional home appraisers can be COLOSSALLY full of shit.

        Dig into it a little, and you'll find gross inconsistencies in practices and an unwillingness to even explain their arcana - particularly when they're actually thrown to their own devices and don't have 'comps' that are anywhere close.

        • Absolutely agree. I know it's all completely arbitrary. But when month after month goes by and houses in your neighborhood are selling well, but Zillow seems to indicate they're all worth 20-40% less than what they're selling for, then Zillow seems to be a lot more arbitrary.

      • Re: (Score:2)

        by Quirkz ( 1206400 )

        I learned to mistrust Zillow long ago. We bought just at the start of the housing crash, and I watched Zillow push up prices on our place for two years even while everything was falling apart.

        More recently, I looked again out of curiosity, at the chart where they track three values: county, city, and your home. The graphs for both the county and the city had smooth, gentle upward slopes across several years, basically in lock step. In the same time, their estimate for our house, which had matched that trend

    • You should have offered her the opportunity to increase the value of her house by $50k by planting really, really nice plants in your garden.

      Seriously, if you lived next door (not "down the street") and I was selling my house, it would be something to consider. (If you tried to do anything to take advantage that smells like blackmail, the baseball bats come out).

  • Zillow isn't accurate, but buyers don't rely on it (Score:4, Insightful)

    by gurps_npc ( 621217 ) on Wednesday May 10, 2017 @11:20PM (#54397859) Homepage

    1) I agree that Zillow is not accurate. It consistently mis-priced my condo for a long time. Among other things, it doesn't account for the quality of the interior at all. Nor does it properly take into account 'equivalents', which in NYC may be restricted to other condos in a specific building, and not include condos across the street.

    2) I also agree that Zillow should have a better 'user complaint' form, specifically if a licensed appraiser submits a value, they should willingly replace their estimate with it.

    3) But requiring them to be licensed is silly.

    4) Also, no serious buyer would use the Zillow price rather than a price a Realtor suggested. Realtors know about the issues in #1 and account for it. At most you will be eliminating those people too cheap to use a realtor.

    This is not going to reduce your price sold by more than 3%, and is unlikely to increase it either (unless you get someone not using a realtor who is also foolish enough to ignore the licensed appraisal.)

    • Also, no serious buyer would use the Zillow price rather than a price a Realtor suggested.

      Realtors aren't any better. They exist to maximize their profits and minimize their costs. I have yet to meet a Realtor whose best interests align with mine. They're almost as bad as the Nigerian scammers, but not quite.

  • Bogus (Score:3)

    by thisisauniqueid ( 825395 ) on Wednesday May 10, 2017 @11:31PM (#54397883)
    The reality is that the entire market is comprised of numbers pulled out of the air. Therefore, suing Zillow for doing what the entire market is doing is completely bogus.

    That said, I kind of hate how Kelly Blue Book dictates the price of the entire auto resale market, so yes, all appraisals should be abolished. It's hard to do though in a market of non-fungible items, like houses, where there is no fully objective way to compare one house to another.

    • KBB hardly dictates the price of the entire auto resale market. I've only ever found one seller in my entire driving history willing to come down to KBB prices, and that was a close friendly coworker at a car-centric job, and even that was a hard negotiation. Basically nobody is willing to accept "just blue book" for a used car in my experience.

      • Regardless of whether you think KBB is high or low (basically, depending on whether you're a buyer or seller), people apply an adjustment factor in their head. I'm not talking about KBB dictating the acutal price paid, I'm talking about KBB setting the entire pricing structure for the whole market, by providing reference points. Regardless of what people think about KBB, they will never make a purchase without consulting it for reference. That's the whole point: it no longer comes down to an "invisible hand

        • The invisible hand of the market functions only on the condition of all parties being well informed, and since KBB is compiled from actual market data (what cars are actually selling for) all it's doing is informing all parties and making that invisible hand work more efficiently.

          • Oh come now. It's a used car. The most-efficient mode of operation would be for it to sell based on its usable lifetime adjusted for maintenance costs relative to its passed lifetime. The rest is just imaginary valuation.

            New goods sell based on their cost. Cost is wages. If you cut labor-hours required to make things by 50%, they cost half as much; add the same profit margins on top at every level of supply and you get ... half the price. People are working the same hours, so they still have the sam

            • That's not how markets work. It's how an ideal, perfectly efficient market would be forced to work, but it's not how real world markets with all their inefficiencies actually work. Every seller of everything is always trying to get the highest price; every buyer of everything is always trying to get the lowest price; and the prices they end up agreeing on are based on the next-best alternatives (that they know about). In some markets, like say commodities markets (trading large volumes of fungible goods bet

              • Every seller of everything is always trying to get the highest price; every buyer of everything is always trying to get the lowest price; and the prices they end up agreeing on are based on the next-best alternatives (that they know about).

                In production, the lowest price that can sustain a product's existence is the cost. That's wages and cost of risk; a supply chain piles up some wages for extra overhead and risks that wouldn't exist in a vertical monopoly, and also nudges the price up by intermediate profits, although those profit margins get slim as hell in the supply chain (e.g. GM has orders for millions of tons of steel per year; they get a much, much slimmer margin that someone buying thousands of tonnes of steel could ever hope for,

        • In negotiation, published standards of fairness give you a hell of a lot of weight.

          • Only if you're on the side of the published standard (generally meaning, if you're the seller, since published standards are like tent poles that hold the prices up -- i.e. they artificially inflate prices, in spite of the natural level of demand). If it's working against you (as a buyer), then they don't help you at all, they cause you to have to pay higher than what would otherwise be market rates.

            • In a depressed market, the seller can argue they paid some amount for the house some years ago. You then have the nebulous argument that the market is down some, so they give you -$20k instead of -$150k. The seller really doesn't want to take 1/3 depreciation on their asset, and can point to their purchase price as a standard; with a depressed market, you can point to a market trend and a published standard of similar properties as justification of the huge depreciation.

              A buyer willing to pay will be l

    • Re: (Score:2)

      by Lehk228 ( 705449 )
      KBB doesn't dictate values, it documents them.
    • I've bought a few used cars and I find that KBB is worthless and dealers totally ignore it opting to use NADA instead. Needless to say I don't like working with dealers as I find a great many of them to be weasels and you need to walk in with that expectation being ready to walk out since dealers will prey on your attachment to a particular car you like. The old saying goes; if you buy a car and the dealer is smiling at the end of the deal then you're the one who got screwed.

      • I've only found one way to get a decent price from a dealer. It depends on you needing just a 'transportation special'.

        Wait until the wholesale auction car mover shows up, then go to the backlot, find a wholesale car that's acceptable and offer them $50 more than the minimum bid (which will be posted in the car window).

        They won't take it initially, point out how much hauling costs and auction commissions are, say 'tick tock' and point out that you aren't buying another car from them if the car goes on

  • It amazes me that someone didnt sue them years ago for this.
    There's no way a website can generata an accurate estimate for your house, but people will beleive the figure they post or at least use it as a guideline so ts its inevitably gonna be harder to convince potential buyers that zillow in fact fucked up rather than you are overvaluing it.

    I'd go as far as to say that their estimates are basically self-fulfilling prophecies that can easily hurt both buyers and sellers in the pocket by skewing the market

  • A much better way of doing this is to show sale prices of properties nearby, as the UK sites right move [rightmove.co.uk] and Zoopla [zoopla.co.uk] do. This way you can see which are roughly equivalent properties pretty quickly, then look on street view to refine your matches or even go and drive past in person.

  • Zestimates are pointless because everyone except for absolute newbies to the real estate market knows they are completely wrong. Newbies will rapidly become educated - no, sorry, that ramshackle house your mom willed to you in the wilds of some depressed former coal mining region isn't worth $750,000 when literally every other home being sold near there is going for 1/10th that.

    Further, Zillow re-writes history when Zestimates change - there's an historical graph they have that doesn't remotely match what t

    • The Zestimate is a 2-dimensional value. They're trying to display the market valuation of the house over time, not their valuation of the house at different points in time. A graph of the actual Zestimate history would be a one-dimensional value tracked in a two-dimensional graph.

  • What Zillow does is called a Comparative Market Analysis. You take the value of similar properties recently sold in the area to estimate the value of the one you're doing it for. Agents, not appraisers, do CMAs. Appraisers will put together somethign like a CMA, but only after inspecting the home. Basically, the set of things an appraiser does is a superset containing the set that defines a CMA.

    The most important distinction being that a CMA is not an official determination of value, it's a non-bindin

  • She's blaming Zillow for her woes is she ? Zillow has some usefulness, but is far from a total ( or accurate ) picture of why a home price is what it is.

    What's next ? Folks going to go after Edmunds True Car Value or Kelly Blue Book because they feel they're undervaluing their cars ? :|

    It's a third party ESTIMATE based on an algorithm for fucks sake.

    You want to know what counts ? The folks that actually appraise your home periodically to set your tax rate. ( I highly doubt they rely on Zillow data btw

    • Boom or bust, the county valuations around here are always lower than the going market price. But you're still right in that it is a safer estimate to build off of.

  • I have no idea how they calculate my home's value, but it's obviously not based on direct comps from recent sales around here. The square foot price that they're using is about 10% lower than what I would easily get. To be fair, home prices have risen by something like 30% in the last 3 years since I bought it, and it looks like zestimate doesn't handle this sort of market very well.

  • Zillow blindly scrapes the sales info from county web sites and deed book. I was seriously looking to buy a condo in Florida. Curiously two condo units had double the value of all other identical units. Did some digging and found someone, likely an investment company, bought two condos in one deed. Zillow has happily assigned the total price to each condo!

  • What about website/domain name value estimators? They also pull a seemingly-random number out of a hat, disagreeing with each other by 1000% or more, and no doubt impact what a buyer is willing to pay. Yet it's hard to see how it would be in the public interest to outlaw all machine-generated estimates.

  • I treat the Zillow estimate the same way as a budgetary quote for customers, it's+-30%. Using the 30% number her townhome fall's well within the range of the margin of error. If you want a real estimate pay to have a person to come look at your house and put a value on it, they are called restate agents.

  • There's a giant "I disagree with this Zestimate" right under the Zestimate. It allows you to offer a real appraisal (which generally costs money -- in Northern California it's around $400) through an agent.

    And the Zestimate is going to go up and down, just like any other estimate. If the house next to yours sells for $100,000 less than you might have thought, your house will likely drop in value. Your house might sell for a lot more, but the value will drop regardless as neighborhoods count towards your

  • By the time a house pops up on zillow its already sold, I know cause I was in them a week or more before. Their square footage is almost always wrong and their estimate's are just random guesses.

    When I bought my house last year it took about a day of looking at zillow to know its absolute worthless bullshit

  • The last time I was looking at them, between '10 and '12, 100% of the time they *massively* OVERVALUED the properties, and sizes.

    Data: my real estate agent Chicago (which, btw, is Cook Co), did her due dilligence in '03. Zillow claimed that, at the time, it was worth 20% more. They lied.

    I looked at the house I bought in Montgomery Co, MD, in '11. They claimed it had something like 500^2 *more* than it does (and was worth more than I paid).

    They're crooks. Refin, on the other hand, seems to give *reasonable*

  • Comment removed based on user account deletion

  • Zillow showed my house as being worth so much that we started the paperwork with our mortgage broker to get cash out (we wanted to finish the basement). The mortgage broker confirmed Zillow's valuation as "a good faith estimate" but required an actual appraisal.. The official appraisal (which cost us $500) came back nearly half of what Zillow estimated, and based on how much we still owed we didn't qualify. I wanted to sue Zillow for their misleading estimate but thought that what they did wasn't actionable

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