A possible class action lawsuit brought by customers Vipul and Jyotsna Patel and Schaumburg-area developer Castle Builders in Illinois has been brought, which claims that Zillow’s Zestimate tool unlawfully publishes incorrect estimates of property values, which misleads potential property buyers and thwarts efforts by property owners to sell their properties.
Based in Seattle, Zillow Group’s Zestimate tool works by generating an estimated value for a given property, regardless of whether or not that property is on the market. The estimate is achieved by applying a proprietary algorithm to publicly-available information, such as statistics from county assessor’s records. The resulting property’s Zestimate value is then published on the Zillow real estate marketing website.
According to allegations made in the proposed class action, property owners have been criticizing Zestimates for years, claiming the estimates can be wildly inaccurate. While Zillow admits to a median error rate of five percent, allegedly, the margin of error for their estimates can be 30 percent or more from a given property’s real market value.
The allegations against Zillow also claim that potential home buyers treat a Zestimate as a formal appraisal, whether it is one or not. However, Zestimates are frequently 20 percent lower than the property’s fair market value, which creates unrealistic expectations for potential buyers.While the standard appraisal process affords property owners the right to challenge the appraiser’s valuation process, Zillow offers no such comparable process to allow correction of a Zestimate.