The Real Deal Chicago

Case dismissed: Judge says Zillow’s Zestimates are clearly just estimates

Homeowners had sued the online listings giant, claiming it poses Zestimates as precise calculations of a home’s value
May 08, 2018 02:24PM

Spencer Rascoff

A Zestimate, in the end, is just an estimate.

A federal judge dismissed a lawsuit by several Chicago-area homeowners over Zillow’s “Zestimates” of home values.

The suit had alleged Zillow leads homebuyers to believe that its Zestimates are precise calculations of a home’s current market value, when in fact they’re often inaccurate.

But U.S. District Judge Amy St. Eve dismissed the suit Monday. She said the online listings giant’s Zestimates “”are not false or misleading representations of fact likely to confuse consumers,” according to Crain’s, which first reported on the dismissal. They are, the judge said, merely an estimate of the market value of a property, which Zillow makes clear on its website.

It was the second time St. Eve dismissed the suit; she tossed out a previous version of it in August. But the homeowners refiled.

On a section of its site that discusses Zestimates’ accuracy, Zillow says in the Chicago area, a Zestimate is likely to come within 5 percent of the actual sale price about 57 percent of the time.

Barbara Andersen, the lawyer who represented the homeowners, did not respond to requests for comment from Crain’s. Neither did Vip Patel, a homebuilder who along with his family’s company, CastleBldrs.com, were plaintiffs in the suit.

In a statement to Crain’s, Zillow said it was “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.”

Andersen originally sued Zillow in Cook County. Its Zestimate of her home was about 11 percent lower than her asking price of $626,000 and had created a “roadblock” to selling it.

Andersen later replaced that suit with one where she represented Patel and his family’s firm, which has been building houses for about 16 years. Patel said at the time that “in our experience, Zillow is always at least 20 percent lower than the home’s market value, but that’s the number they have planted in the buyer’s head,” according to Crain’s.

Nancy and Ulysses Koutropoulos later joined the suit, saying they were asking $849,000 for a house whose Zestimate was $795,000. They have since reduced their asking price to $799,500, according to Crain’s. They could not be reached for comment.

St. Eve, though, rejected their claims of deceptive business practices and consumer fraud.

“These threadbare allegations … fail to present sufficient facts to plausibly suggest that Zestimates will cause consumers not to buy Plaintiffs’ properties and that Plaintiffs will not be able to sell their homes at their true market value,” St. Eve wrote.

A lawsuit filed in New Jersey, meanwhile, claims Zillow conceals Zestimates on residential listings at the request of brokerages that have “contracts” with site.

The role of “The Z Word” in setting a listing price was brought up Tuesday morning during a Chicago Association of Realtors panel discussion on pricing and negotiating in a competitive residential market.

Amanda McMillan of @properties said Zestimates have become less of an issue when talking with clients about how to price a property than when they first came out.

“When it first came out people put a lot more weight on those Zestimates,” she said.

Compass’ Amy Duong Kim said clients now are more savvy and smart, and are able to gather the data on their homes independent of the Zestimate. But @properties’ Rick Sobin said brokers should be ready for sellers to ask them about the Zestimate on their home.

“What you should say is, ‘Oh, has a representative from Zillow been here to see your home?’” Sobin said. [Crain’s] — John O’Brien