A family of homebuilders is suing Zillow Group over the Zestimate in Illinois.
The suit, which is seeking class-action status, alleges that Zestimates are illegal appraisals and violate consumer protection laws.
Barbara Andersen, the attorney representing the family, had sued Zillow Group over her own home’s Zestimate earlier in May. But she dropped that case and filed the new one after receiving “overwhelming demand” to challenge the legality of Zestimates on behalf of all homeowners whose properties are listed on Zillow, she told Inman.
Zillow Group says that the charges are “without merit” and plans to file a “timely response,” said Emily Heffter, a spokeswoman for Zillow Group.
Andersen expects the case “will go to appellate court no matter who wins.”
Andersen said she teamed up with plaintiffs Vipul Patel, Bhasker Patel, Jyotsna Patel and CastleBldrs.com to sue Zillow because they were comfortable with the media attention that was likely to result.
The case has sparked national press coverage, including an article in the Chicago Tribune. Andersen said Monday that she had been asked to appear on NBC.
“It’s a very long process,” she said. “It’s only just beginning.”
What does the complaint seek?
The complaint asks the court issue an injunction requiring Zillow to take down Zestimates for all Illinois homeowners and pay damages and attorneys’ fees.
It charges that Zestimates cause homeowners to “suffer irreparable injury” and “monetary loss,” in part by pressuring sellers seeking clarity on their home’s value to hire brokers.
Andersen said she is also filing a complaint with the state attorney general recommending an investigation of the Zestimate.
“Some of the attorneys were saying, ‘Hey, Barbara, how come you’re being forced to do this,’ and that’s a good question,” Andersen said, explaining the rationale of her request to the attorney general.
4 properties as examples
The complaint filed against Zillow Group calls out four properties owned by the homebuilders. One, a newly built home, is listed for $1.995 million but only has a Zestimate of $1.168 million. (Zillow Group spokeswoman Heffter said most of the other homes are not yet built.)
Some buyers have expressed skepticism over the price of one of the homes due to its Zestimate, Andersen said.
It’s “pretty blatant” how the Zestimate can injure a homeowner, she said. “It’s right there under your asking price.”
The complaint contends that the Zestimate meets the definition of an appraisal under Illinois state law.
“As such, Zillow should not be engaging in this business practice without a valid appraisal license and, further, the consent of Plaintiffs and/or the Class,” the complaint reads.
Interpretations of appraisal law
Emily Heffter, a spokeswoman for Zillow Group, points out that Zillow states on its website that Zestimates are not appraisals.
Andersen says that this rebuttal is a “red herring,” because claiming a Zestimate is not an appraisal doesn’t mean that it isn’t serving as such.
Heffter also points out that Illinois appraisal law does not apply to “the procurement of an automated valuation model (AVM).” AVMs are used to calculate Zestimates.
But by Andersen’s reading of the law, this exemption only applies to financial institutions.
She contends that financial institutions and brokers may use AVMs for “internal purposes,” but that an automated valuation cannot be publicized without a homeowner’s consent.
Bigger than the Zestimate?
Andersen acknowledged that if her argument stands up in court, many other property estimates published online, not just Zestimates, could be deemed illegal.
The Zestimate is a “nonsense methodology” that doesn’t comply with “legally recognized appraisal standards,” the complaint alleges.
Heffter said that, prior to the two cases involving Andersen, Zillow had never been sued by homeowners over their Zestimates, adding that the company advises homeowners who are unhappy with their Zestimate to add or correct home facts — number of bedrooms, bathrooms, parking spaces and other property features, etc. — on their Zillow listing, which can generate a more accurate Zestimate.
“We do that so consumers have some control over the way their homes look online,” she said.
However, Andersen believes the ability to change a home’s facts “supports her point,” alleging that this feature shows that such a system is not compliant with appraisal standards.
‘Right to seclusion’ and confusion
The lawsuit also claims the Zestimate violates the plaintiffs’ legal “right to seclusion” by failing to obtain consent before collecting financial information, using it to value properties, disseminating the valuations and refusing to allow plaintiffs to opt out of the dissemination, among other things.
In addition to hindering a sale, the Zestimate causes injury to homeowners by “forcing many sellers to hire brokers because of the confusion created by Zillow (therein adding additional and otherwise unnecessary expense to the sale of the property),” the complaint says.
Heffter added: “We think people should use an agent and we recommend it, but we’ve never forced anyone to use an agent.”
Zillow has “publicly embraced the fact that the confusing and inaccurate ‘Zestimate’ tool is nothing more than an improper marketing ploy for Zillow’s premier agents to use in further invading the Plaintiffs’ and the Class’ right to seclusion,” the case alleges.
Citing similar arguments, the complaint also alleges that the Zestimate violates state laws protecting consumers against deceptive trade practices and consumer fraud.
“I didn’t really expect brokers to embrace this lawsuit but brokers have as well,” Andersen said.
Editor’s note: This story has been updated.