Appeals court sides with Zillow in lawsuit over Zestimate accuracy

A federal appeals court sided with Zillow in a long-running lawsuit over the accuracy and marketing of the real estate giant’s controversial Zestimate tool.

A group of homeowners in Illinois sued Zillow in 2017, alleging that the Zestimate tool is often inaccurate and difficult to get changed, and that Zillow markets it as roughly equivalent to an appraisal. The homeowners argued that the tool undervalued their homes and made it harder for them to sell.

The homeowners appealed the case last year after their claims were twice dismissed. In a brief opinion, The U.S. Seventh Circuit Court of Appeals ultimately agreed with the judges’ prior rulings.

The court found that Zillow is honest about labeling Zestimate as only an estimate, not an appraisal. The process is most accurate “when errors are not biased to favor sellers or buyers,” so Zillow shouldn’t have to change Zestimate values when they come in lower than what homeowners expect, Judge Frank Easterbrook wrote in the opinion.

Zillow issued the following statement in response to the ruling: “We are pleased that the Seventh Circuit Court of Appeals has reaffirmed the district court’s ruling, which originally granted our motion to dismiss the claims of this lawsuit and found the allegations in the suit without merit. The Zestimate has proven itself to be a sought-after and valuable free tool for consumers.”

GeekWire reached out to the homeowners’ attorney Barbara Anderson, and we will update this post if we hear back.

Over the years, the Zestimate tool has served as a source of contention from home sellers expecting to get more, home buyers expecting to pay less, and real estate professionals wishing they weren’t caught in the middle. Zillow co-founder and executive chairman Rich Barton called the Zestimate “very provocative and personal and a little voyeuristic” in a 2016 GeekWire interview discussing how the company came up with the tool.

Zillow consistently refers to the Zestimate as just one data point that consumers have access to when considering buying or selling a home — along with information such as recent home sales and guidance from real estate professionals. Zillow explicitly points out that Zestimate does not constitute an appraisal and is what it sounds like, an estimate. Launched in 2006, it marked the first time that homeowners gained access to estimated home values — data that was previously only available to real estate agents, appraisers and mortgage lenders.

Zillow says it is on a mission to make Zestimate more accurate. The company just finished up a two-year, $1 million competition with 3,800 teams representing 91 countries trying to best the Zestimate.

by Nat Levy on February 12, 2019 at 12:00 pm