A federal judge in Illinois tossed a lawsuit against Zillow Group claiming that its controversial Zestimate tool represents an unfair business practice and makes it harder for people to sell their homes.
Chicago-area home-sellers led by Vipul Patel brought the lawsuit last year. They argued that Zillow markets Zestimate as a reliable home valuation tool, but it is actually often inaccurate and difficult to get changed. They also alleged Zillow lowers Zestimate values for homeowners selling properties themselves rather than using the company’s affiliated Premier Agents.
U.S. District Court Judge Amy J. St. Eve shot down the home-sellers’ arguments that Zillow’s practices violated Illinois laws against deceptive trade practices and consumer fraud. In her opinion last week, she wrote that Zillow is very clear about the fact that Zestimate is a starting point not a valid appraisal. St. Eve ruled that the the defendents hadn’t provided proof that Zestimate kept them from selling their homes at market value, nor did they show that Zillow’s business practices hurt consumers, in this case home-buyers.
Zillow said following the decision that “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.”
Judge St. Eve dismissed the home-sellers’ original lawsuit in August, but the court did let them come back with an amended version of their complaint.
GeekWire reached out to the homeowners’ attorney Barbara Andersen, and we will update this post if we hear back.
Over the years, the Zestimate tool has served as a source of contention from home sellers expecting to get more, home buyers expecting to pay less, and real estate professionals wishing they weren’t caught in the middle. Zillow co-founder and executive chairman Rich Barton called the Zestimate “very provocative and personal and a little voyeuristic” in a 2016 GeekWire interview discussing how the company came up with the tool.
Zillow consistently refers to the Zestimate as just one data point that consumers have access to when considering buying or selling a home — along with information such as recent home sales and guidance from real estate professionals. Zillow explicitly points out that Zestimate does not constitute an appraisal. Launched in 2006, it marked the first time that homeowners gained access to estimated home values — data that was previously only available to real estate agents, appraisers and mortgage lenders.
Zillow creates the estimates by pulling available data on the home and running it through a proprietary algorithm. But the estimates are only as good as the data available. Zillow says on its website that its median error rate is 4.6 percent, meaning that Zestimate values for half of homes are within 4.6 percent of the selling price, while the other half are off by more than that.
The Washington Post notes that Zestimate accuracy can vary wildly by area. For example, some Illinois counties have error rates of 20 percent or more.
Here is Judge St. Eve’s full opinion dismissing the lawsuit against Zillow:
Judge Amy J. St. Eve opinion and order by Nat Levy on Scribd