A recent lawsuit filed against Zillow by a homeowner in Illinois demonstrates why you can’t quite trust their Zestimate tool.
In case you didn’t know, Zillow is the largest online search engine for homebuyers. The Zestimate is their version of an estimated value for a property.
A recent development in the real estate industry illustrates why you can’t quite trust Zestimates. A woman in Illinois has filed a lawsuit against Zillow, claiming that her Zestimate undervalued her house and created a roadblock for its sale. Despite Zillow’s denial that they offer appraisals, the fact that they’re promoted as a tool for potential buyers to use in assessing the market value of a property shows that the definition of an appraisal under Illinois state law was met.
The lawsuit argues that Zillow should be licensed to perform appraisals and that they should also obtain the consent of a homeowner before they go online. The Zestimate in question is for a townhome that was bought for $626,000 in 2009 and recently listed on the market for roughly what it was bought. However, the home’s most recent Zestimate was only $562,000. The homeowner is suing Zillow to either remove the Zestimate or amend it.
"Zestimates supposedly have a median error rate of 5%."
Zillow has a different take on the situation. They don’t see their Zestimates as an appraisal, but rather as a tool that utilizes a proprietary algorithm to assess value. According to some, they have a median error rate of over 5%. That can mean a lot of money on the table. Zillow is now offering a $1 million prize to anyone who can improve their algorithm.
Until the Zestimate can be improved, my advice to you is to not allow Zillow to dictate your buying or selling choices. If you’re curious what your home is really worth, give me a call or send me an email and I’d be happy to perform a real analysis on it.
In the meantime, if you have any other questions about this or any other real estate topic, don’t hesitate to reach out to me. Talk to you soon!
