Zillow Sued By Homeowner Because Its Estimate Is Lower Than The Seller Wants To Sell The House For

from the sellersmarket.com dept

Real estate site Zillow is getting sued. Again. The company has already been sued for trade secret theft, copyright infringement, and settled multiple lawsuits related to harassment and other workplace violations. This time it's getting sued for handing out a "Zestimate" the plaintiff feels is too low.

Barbara Andersen, an Illinois resident and real estate litigation attorney, is asking the court to force Zillow to take down its estimate of her home's value, which she believes is incorrect.

According to Andersen, Zillow falsely stated her home sold for $685,000 last fall. Most recently, it appraised the home at $562,000, a $90,000 drop in just six months, the lawsuit states. She says she has repeatedly reached out to Zillow, and written to its legal department seeking removal or amendment of the Zestimate, but her communications were ignored.

Andersen is attempting to make Zillow subject to Illinois real estate law, even though, as she notes in her lawsuit, Zillow doesn't actually perform appraisals. Appraising without a license is illegal in Illinois, but this assertion seems to be undercut by Andersen's quoting of Zillow's extensive disclaimer. From the filing [PDF]:

In describing its "zestimate", Zillow denies that it is an "appraisal". A copy of their webpage description is attached hereto as Exhibit A. However, Zillow concedes that it is an estimate as to market value and is promoted as a tool for potential buyers to use in assessing market value of a given property. As such, despite their disclaimer, Zillow's zestimate meets the definition of an appraisal under Illinois law. As such, Zillow should not be engaging in this business practice without a valid appraisal license and, further, the consent of the homeowner.

But according to the law she cites, Zillow would have to refer to its "zestimates" as appraisals and/or infer that it's licensed in the state to perform appraisals. It doesn't do either of those things. Buyers browsing the site may believe the estimates are actually appraisals, but Zillow doesn't present these as anything other than estimates.

This is a somewhat novel use of state licensing laws against Zillow. Normally, it's been real estate brokers threatening lawsuits or legal action, hoping to lock Zillow out of the local housing market. In this case, though, it's a homeowner who can't sell her house and is hoping to hold Zillow responsible for the lack of interested buyers. Since it's unlikely Zillow is solely to blame for Andersen being unable to make back what she paid for the home, there are more than a few questionable assertions in her complaint.

Since the recession, Andersen has been attempting to sell her home on different occasions. However, a tremendous roadblock to same has been the fact that Zillow posts a "zestimate" of person's homes without their permission, consent and/or any license to do so…

Andersen doesn't explain why she feels Zillow should legally be obligated to obtain permission from homeowners before posting its estimates. Nor does she attempt to link the multiple failed sales attempts with Zillow's zestimates, other than implying (in a very conclusory manner) that price fluctuations in Zillow's listing are keeping buyers away -- even when the "zestimate" was higher than her asking price. She also states she's been doing this "since the recession," which suggests she's been in the process of selling the house for a very long time -- a time where apparently Zillow's estimates were having zero negative effect at all on potential buyers (i.e., when Zillow's estimates aligned better with Andersen's view of the house's value).

Then there's this part, which suggests her inability to sell might be completely unrelated to Zillow's estimate.

[I]n the last months, Andersen decided to lower her asking price and terminate her broker (in order to reduce closing expenses). At approximately that point in time, the zestimate suddenly started to plummet. Now the zestimate is effectively that of the new construction homes described i.e. with no reflection of the superior locale, etc. as noted above.

Correlation isn't causation, but the complaint asks the judge to believe that it is. Andersen's arguments are further undermined by similarly threadbare assertions. For example, this paragraph of the suit suggests Andersen's view of her house's value is perhaps TOO subjective:

After the recession concluded, Glenview allowed new construction. Those homes have approximately the same square footage as Andersen. However, they are located in a less desirable (more condensed homes, busy streets, by Willow Creek Church, by a cemetery and less desirable golf course) and further removed area of the Glen Town Center. The only similarity of these homes is that they gave themselves the label of being located within the Glen.

The suit also contains allegations Zillow lowers estimates when sellers don't use brokers, since one of Zillow's revenue streams is partnerships with brokers. Maybe this is true, but the lawsuit contains nothing that backs up the claim other than stuff like the paragraph above.

Whatever's really happening at Zillow, it's unlikely the site is solely -- or even chiefly -- responsible for any seller's inability to sell their property. Zillow may have a larger share of the estimate market than its competitors, but it's hardly the only company in the business. Andersen claims Zillow will suffer no harm by delisting her property or changing the estimate to reflect her idea of what the asking price should be, but it's hard to see how this could possibly be true. If the site is viewed as being solely reflective of sellers' desired asking prices, it has zero value to anyone looking to purchase a house.

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Filed Under: barbara andersen, estimates, home sales, lawsuits, opinions, real estate

Companies: zillow