Zillow Group has emerged unscathed from a legal attack on the Zestimate.
On Wednesday a judge threw out the lawsuit alleging that Zestimates constitute illegal appraisals and violate consumer protection laws, granting Zillow Group’s motion to dismiss.
“We’re pleased the court has dismissed this,” Zillow spokeswoman Emily Heffter told Inman. “The Zestimate has proven itself to be a sought-after and valuable free tool for consumers.
But real estate attorney Barbara Andersen, who represented the family of homebuilders that brought the case, hasn’t decided to throw in the towel yet.
Only one of four counts in the complaint — the claim that Zestimates are illegal appraisals — was dismissed with prejudice. The other three, which accused Zillow of violating certain consumer protection laws, were dismissed without prejudice.
“That means we have the right to amend,” Andersen said.
She said she would look into exercising this option — in which case a judge might revisit the complaint.
In the proposed class-action lawsuit filed in mid-May, a family of Illinois homebuilders sued Zillow over Zestimates for properties they owned, including two for-sale homes whose Zestimates were far below their list prices. The suit requested that a judge order Zillow Group to take down the Illinois Zestimates and sought damages on grounds that the home price estimations allegedly drove away potential buyers, among other reasons.
Real estate attorney Barbara Andersen had previously sued Zillow Group over her own home’s Zestimate. 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.
In a memorandum accompanying Zillow’s motion to dismiss the class action case in June, Zillow argued that just like stock forecasts, search engine rankings and editorial reviews, Zestimates are constitutionally protected as free speech.
The real estate giant also noted at the time that the law expressly excludes “the procurement of an automated valuation model [AVM],” and that the Zestimate is an AVM. (Andersen previously claimed the exemption only applies to financial institutions.)
Judge Amy J. St. Eve agreed with Zillow on this point, dismissing with prejudice the suit’s claim that through Zestimates, Zillow Group acts as an unlicensed appraiser. State appraisal licensing law doesn’t apply to Zestimates because they are considered AVMs, which are explicitly exempted from the law, she ruled.
Nor do Zestimates constitute an invasion of privacy as the plaintiffs had alleged, according to the judge. She dismissed this claim without prejudice, stating that Zestimates are based on public and user-submitted data; are not offensive; and do not cause “anguish or suffering.”
The suit’s allegation that Zestimates violate state laws against deceptive trade practices and consumer fraud were also dismissed without prejudice.
The judge said that, based on the pleadings, “Zestimates are not false, misleading, or likely to confuse,” citing labels, disclaimers and accuracy data provided by Zillow Group about Zestimates online.
“Given Zillow’s representations regarding Zestimates, as pled in the complaint, Plaintiffs have failed to plausibly allege that Zestimates are anything more than nonactionable statements of opinion,” she wrote.
The plaintiffs’ theory that buyers would lose interest in a home due to an allegedly low Zestimate was too speculative to survive a motion to dismiss, she added.
Anderson, the plaintiffs’ attorney, said she planned on addressing the rulings in a real estate podcast next week.
“I will not opine too much,” she said. “Just explain it and our potential game plan [for amending the suit].”
Commenting on the case’s dismissal, Zillow Group’s Heffter said the Zestimate is “the most accurate computerized home value estimate anywhere, and serves as an important data point for millions of homeowners, buyers and sellers every day.”
Zestimates, first launched in 2006, have survived the test of over a decade’s time as Zillow continues to invest in the tool. In May, Zillow announced that it would give $1 million to the team or person who builds an algorithm that beats Zillow’s benchmark accuracy “and enhance[s] the accuracy further than any other competitor.”
Many agents still complain about inaccurate property estimates generated by AVMs, but industry acceptance has come a long way. Freddie Mac, which buys a large share of U.S. mortgages from lenders, has begun using AVMs to evaluate whether an estimated value provided by a lender can substitute for a traditional appraisal.
Editor’s note: This story has been updated with comments from the attorney representing the plaintiffs that brought the case against Zillow Group.