“Zestimates” can stay, judge rules

“Zestimates” are just an estimate, with a Z.

So ruled a federal judge, who dismissed an Illinois lawsuit by homeowners who sued Zillow Group over its controversial home valuation tool. In May, a group of homeowners alleged that the Zestimate computer algorithm undervalued their homes and made them harder to sell.

“The word ‘Zestimate’ — an obvious portmanteau of ‘Zillow’ and ‘estimate’ — itself indicates that Zestimates are merely an estimate of the market value of a property,” wrote Judge Amy St. Eve, who also pointed to disclaimers by Zillow that Zestimates are not official appraisals.

In a statement, Zillow said it was pleased with the judge’s ruling. But the plaintiff’s attorney Barbara Anderson argued that “Zillow has unilaterally imposed its opinions on the value of homes without the consent of homeowners,” she told Reuters. “It impairs people’s ability to sell their homes because the estimates do not comply with recognized appraisal standards, and some are way too low.”

In May, two weeks after Anderson’s clients filed suit, Zillow offered a $1 million prize to anyone who could improve its Zestimate algorithm, which the company claims has a median error rate of 5 percent, down from 14 percent in 2006.

Last year, Zillow CEO Spencer Rascoff paid almost $20 million for a Los Angeles estate, which had a Zestimate of $18.4 million. [Reuters] – E.B. Solomont