You already know that an algorithm determined by data you submit to a real estate website will result in a less-than-accurate guesstimate of your property’s worth. Some For Sale by Owner properties may in fact be sold for less than their true value when sellers use these Automated Valuation Models (AVM) to determine how much to sell for. These sites often rely on less-than-complete data to provide the value as determined by their automated Comparable Market Analysis. In states like Idaho where sold price data is confidential outside the parties involved, these guesstimates may be egregiously erroneous.
Last month a meeting of broker members of the Coeur d’Alene Association of Realtors voted not to enter into a contract to provide any data to one of the aggregators of real estate statistics who offer the CMA service. Unfortunately some of our own members are leaking this confidential information to the AVMs like Zillow.
Several lawsuits have been filed against Zillow, the largest offender, and it will be interesting to see where it goes. Suburban Chicago home builders filed legal action last week against the real estate marketing company, whose at-your-fingertips property-value approximations are misleading homebuyers with lowball figures that roil sellers, the suit claims. The so-called Zestimates that the Seattle-based Zillow app has calculated since 2006 pose as accurate appraisals in violation of the legal description in Illinois of an appraisal, which needs to be conducted by a licensed appraiser, according to the class-action complaint. It appears to be the first of its kind against Zillow over its Zestimates. Zillow, for its part, maintains its approximations are not actual appraisals, nor do they claim to be.
“We believe the claims in this case are without merit. We always say that the Zestimate is a starting point to determine a home’s value, and isn’t an official appraisal. It’s a computer-automated estimate of your home’s value,” said Emily Heffter, a Zillow spokeswoman.
Zillow says its value estimates are based on public records and other data using “a proprietary formula.” Public records such as those posted on property-tax assessment sites can also be far off prevailing sales prices. Zillow also provides a disclaimer about the accuracy of its approximations. But in Idaho the important component of that formula is missing: current sales prices.
Recently a homeowner filed suit against online realty giant Zillow, claiming the company’s controversial “Zestimate” tool repeatedly undervalued her house, creating a “tremendous road block” to its sale.
The suit, which may be the first of its kind, was filed in Cook County Circuit Court by a Glenview, Ill., real estate lawyer, Barbara Andersen. The suit alleges that despite Zillow’s denial that Zestimates constitute “appraisals,” the fact that they offer market-value estimates and “are promoted as a tool for potential buyers to use in assessing [the] market value of a given property,” shows they meet the definition of an appraisal under state law. Not only should Zillow be licensed to perform appraisals before offering such estimates, the suit argues, but it also should obtain “the consent of the homeowner” before posting them online for everyone to see.
Recently Anderson dropped her suit to join a class-action lawsuit alleging the same types of damage done by erroneous data provided by Zillow. More to follow.
Trust an expert…call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.
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Kim Cooper is a real estate broker and the spokesman for the Coeur d’Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d’Alene Association of Realtors, 409 W. Neider, Coeur d’Alene, ID 83815 or by calling (208) 667-0664.