The Zillow Group has snagged another win in the battle over the real estate tech company’s headline-making Zestimate® tool following a class action lawsuit brought by a group of Chicago-area sellers in 2017. The lawsuit alleged that Zestimate fell far short of the accurate home pricing utility promised by Zillow, instead delivering inaccurate numbers overall — generally quite a bit lower than sellers believed their properties were worth — and also undervalued homes for sale by owner versus those listed by Zillow’s highly marketed Premier Agents.
Here’s what you need to know about the plaintiffs’ assertions, where the case stands and how you should handle the Zestimate issue with search-happy clients.
What Is Zillow’s Zestimate?
Zestimate uses millions of data points culled from public systems and user submissions to estimate the appropriate market value for the homes listed on Zillow’s site. Zillow makes it a point to say that Zestimate “is a starting point in determining a home’s value and is not an official appraisal.” In fact, Zillow encourages buyers and sellers to strengthen their pricing position by doing additional legwork, including conducting an in-person viewing of the property, hiring a professional appraiser and asking a real estate agent for a comparative market analysis (CMA).
The Initial Lawsuit
In May 2017, Illinois real estate lawyer Barbara Andersen filed a class action lawsuit in Cook County Circuit Court, claiming that Zestimate’s “sloppy computer-driven appraisal” of homes interfered with sales. Andersen also accused Zillow of tanking her own Zestimate after she terminated her real estate agent in favor of marketing the property herself. Rather than financial compensation, Andersen sought to force Zillow to remove or modify her home’s Zestimate.
Zillow denied all charges, and the case was dismissed by U.S. District Court Judge Amy J. St. Eve with the proviso that the suit could be amended and refiled at a later date, and it soon was.
Which brings us to Zillow’s most recent win. Despite the amended suit, Judge St. Eve once again sided with the real estate giant, ruling that no laws had been violated and that Zestimate was indeed intended to be a starting point for pricing, rather than a firm appraisal of the property at hand. The judge also found that the plaintiffs had not met their burden of proof in regards to charges that low Zestimates kept the sellers from getting market value for their homes.
Zillow’s lawyers spoke to Inman about the results, saying, “We are pleased that the court has dismissed the claims in this lawsuit not once but now twice — finding the allegations in the lawsuit without merit. The Zestimate has proven itself to be a sought-after and valuable free tool for consumers.”
If you’re marketing, selling or assisting clients buying a home and you believe the Zestimate price is inaccurate, Zillow recommends that you head to their site to update your facts. Incomplete pricing and tax history, undisclosed renovations and inaccurate square footage or other crucial details can influence the Zestimate, and changes to that information are almost instantaneously reflected in the daily Zestimate refresh. Still, Zillow claims a median pricing error rate of 4.6 percent, and that’s worth keeping in mind.
Other than that, your best bet is to remind clients that viewing their Zestimate should be more of a just-for-fun activity than a major factor influencing their final pricing decision. It’s up to you, as the real estate professional, to put things in perspective and offer the education your client needs to understand everything that goes into buying or selling their home.