Home : Blogs : Ron Tarvin, Broker Katy, Houston, Cypress 77450,77494,77095 : Katy Texas Real Estate Professional's random market thoughts

Zillow named in patent infringement lawsuit

Automated property valuation service Zillow has been named as a plaintiff defendant (corrected) in a suit by First American CORELOGIC who claims to own the patent on formulas used to do property valuations. Seven other companies were also named in the suit, with Zillow being the name most consumers will recognize but the others also being important in the real estate industry for doing BPO's and appraisals.

Zillow patent infringement

The story is being reported by the Orange County Register and while ZILLOW has responded that they are not intending to change any portion of their business model at this time, the suit, if successful requires the 8 parties named to cease the use of their patented model AND to pay damages.

From a personal view, I have found that ZILLOW's ZESTIMATES are very sporadic in their accuracy. I've seen properties valued very high and some very low. I had someone call me one day that had purchased a home for $230,000 and they called, upset because ZILLOW had it valued at $140,000 and they were mad at me for getting them into a house so upside down. Fact of the matter was that they actually had about $12,000 in equity when REAL comparable sales were pulled. Texas is a non-disclosure state, meaning that Zillow does not have access to the actual sales data.

It will be interesting to see how this plays out.

Call us now if you are looking to buy or sell a home in the West Houston, Katy and Cypress area!

We are the Katy and Cypress area specialists!
Call the team with any questions: 281-935-7152 or our Toll Free information line (anytime):
Call (877)472-5390 and use the code to hear about the topic:

Short Sale Information Code: 7002
$5000 Buyer Guarantee, Code: 7004

List of our services guarantees: 7003

Ron Tarvin, Broker/Owner
Texas Choice Realty
Ron@Txchoicerealty.com
(281) 935-7152 Direct or Text

Texas Choice Realty Website

eAgent Certified, R.E.S.S,
Short Sale Experienced Agent,
HUD Key Compliant
Texas Choice Realty

Power Agent Logo Ron Tarvin, Eagle Scout, 1986

Posted by Ron Tarvin, Broker Katy, Houston, Cypress 77450,77494,77095 on 05/05/2010 02:26 PM

Comments (79)

Zillow in the ActiveRain Channel

zillow

Generate short URL

Post is included in group: RE/MAX Active Rain Bloggers
Post is included in group: Lone Star Real Estate Professionals
Post is included in group: Blogs Happen...

79 Comments on Zillow named in patent infringement lawsuit

MAY

2010

I'll be curious to see how this turns out as well. I've found Zillow to be wildly inaccurate here in Maine. I found out quite by accident that they are using refinancing loan amounts in their formulas as comparable sale prices. I only noticed this when I tried it out to compare it to a cma I had done and low and behold my own home came up as a comparable sale. I found that quite interesting since I have been there far too long for it to be considered in pricing - but I had refinanced within 6 months. They used the amount of my loan which thankfully for me is not the full value of my home.

Zillow Zestimates zuck... Iz ziz a new lawzuit againzt Zillow?

I will stop (see I did not say ztop.)

Orange County article looks new but I thought I already knew this weeks ago? Deja vu all over again?

Duh, did your client not have an appraisal done before they bought the home?

Now they want to trust a website just because its out there?

I know you set them straight.

You wrote: "Zillow has been named as a plaintiff."

Don't you mean "named as a defendant"?? If Zillow is being sued, they are the Defendant, not Plaintiff. The Plaintiff is the party (or parties) filing the lawsuit.

What a mess...I can't stand the Zillow estimates! They are very rarely accurate! Good information, thank you for sharing...it will be interesting to see how this turns out.

I saw this. Nothing like a little success and a threat to kick a lawsuit off!

Well look at that Zillow who says they can do it all oops. It will be interesting to see how it plays out

I have yet to find Zillow completely accurate. As you said though, our clients will look things up and they seem to always believe everything they read.

As a buyer I have relied on Zillow for many things; their values aren't one of them. They make for good entertainment value at best. I have found that a Realtor or appraiser is more valuable inthe long run.

Zestimates are useless. Zillow will not suffer without them.

Zestimates are worthless and in my opinion counterproductive. They give consumers (usually) a false value range of their home. Doing this means the consumer will make decisions based on the usually flawed information. Perhaps they'll wait to sell? The list goes on and on. I love when a buyer tells me "I know the values." Unless they've viewed comparable sales yanked by an Appraiser of Realtor then they haven't seen anything REAL at all. If Zilliow is guilty, damn them. Damn them anyways. I never cared for them.

Guess what...you are correct in saying that Zillow is sporadic here in Texas! I agree with Greg...mostly ;-D Zestimates are worthless not just in Texas but any other state where sold data is not public information. In Texas it leads to a lot of misunderstandings and again as Greg noted the buyer who claims to know values based on Zillow is misinformed!

Wow...interesting info. I wonder how this one will shake out?

If Zillow is using a Patented formulas then it may face some difficulties.

Yes it would definitely be interesting to see how it goes. Unfortunately consumers put too much blind faith in those software.

If the formula is good enough to sue over, why are the estimates so bad?? Just sayin'!

Unfortunately many buyers and sellers take auto-estimates as "word from above" and no matter what we do, they remain unconvinced that a good local agent can do better. I have seen them do nothing but cause trouble for me.

There should be a way to "opt out" since the contracts here in Florida allow our customers to tell us that we CANNOT place their properties on sites that do auto-valuations. Unfortunately, these sites grab the listings from this source or that one, and do exactly what our sellers have forbidden us from doing. Boy, isn't that nice.

We have complained but unfortunately, the "we are better than sliced bread attitude" keeps anyone at these sites from realizing the legal predicament they put us in. They do not care if they are forcing us to break our promises to our customers.

I see people complaining about Zestimates on the Zillow advice forums all the time. I'm not sure I'm entirely ready to throw Zillow under the bus. But I agree with John Elwell...can't believe everything you hear from an auto-estimate system.

Won't this be interesting to watch and see what happens?

Wonder if Zillow will give a Zestimate on what this is going to cost them?

If First American is suing over using their formula then first Americans formula sucks just like Zillow, so does this mean that First American has a patent over misinformation that they are trying to protect?

Very interesting. I've never been a fan of Zillow. They attempt to gain from information others provide. They don't bring anything to the table (except that they're skimming leads from us by using our information to generate the leads).

Do I sound bitter?

Their Zestimates are completely useless, unless the purpose was to have Realtors try to explain to our clients what they mean and how they really have no true bearing to the market.

Interesting. I heard that there are issues with sites such as zillow infringing on doing "appraisals" without being licensed to do so, or something like that. Any word on that?

What I dislike about zestimates and such is that they are gross generalizations and often create more problems than they attempt to resolve. (for us!)

That why they zestimates or guesstimates!

I think it's interesting that TX is a non-disclosure state. Can't Zillow join via IDX and use the data that way? Everything in Raleigh is public domain and it's really cool so long as you know your stuff. If you aren't careful, you can be taken to task by a resourceful client!

Now to make some folks mad- I like Zillow. I'm not a huge fan but they are fast becoming a force to be reckoned with. Here in Raleigh where tax records and deeds are open to the public, Zestimates can be a decent rule of thumb. However, I like the graphs that we can use to discuss trends with our clients.

Even Bank of America has an estimator on their website. Are they part of the suit?

Zillow's guesstimates have given me many of headaches with clients.

I think it is awesome that Zillow is being exposed here for their inaccuracy and it will be interesting to see how this lawsuite plays out.

Real Data is the only one of the other companies I have even heard of.

If you are interested in researching the patent, it is Patent No. 5,361,201, a mathematical model; Real Estate Appraisal Using Predictive Modeling.

I didn't realize that there was a formula that Zillow was using. It looked like guessing to me.

Ron...

I wonder what there is about a mathematical formula that can be patented? Interesting stuff.

I understand that a SPECIFIC mathmatecal formula might be patentable for business use... but I also think that CoreLogic would have to figure out a way to show that it was lifted from them, and not independently arrived at...

But I'm not a lawyer.

Zestimates in my area are often off by about 30% -- on a good day. And this is also according to their own website's data. It will be interesting to see this play out, because I do wonder where the formula began, and if it is possible to prove that it is exactly the same formula that this group developed, and if it could possibly be proven. The site is very popular, which I am sure is why this is coming to fruition. I have to think that Zillow has done its own work and created their own formulas.

Tax records are frequently wrong and do not offer a complete picture of a property and the others that are nearby. Only a human evaluating all aspects of a property can come up with a good value for it. Those that rely on computer generated estimates are going down a path that will lead them astray most of the time. Do keep in mind that even a broken clock is right twice a day. But that does not mean we should use it to keep track of our schedules.

Well that explains both the kookiness of Zillow AND Core Logic. We had a run in with Core Logic a few years ago on a short sale on NAVIGABLE WATER where Core logic was using houses across the street and in the neighborhood NOT ON WATER to get their automated value. Needless to say, the value was less than the lot alone would cost.

Ahh the software patent debate shines through again.

Zestimates are absolutely worthless in our market. The biggest problem is that although they incorporate sales data and basic listing information, they don't take any subjective information into account. We all know that the subtleties of specific location, quality of finishes and unique features are the basis for determining comparative value.

The biggest problem is that the public loves them. Homeowners...even those who are not considering selling their homes anytime soon...as well as buyers, can't get enough of them. Zestimates are the opium of the masses.

I can't tell you how fun it was to watch zestimates in our market when it was in severe decline. They used trustee sales in their comps for a while which is NOT an accurate transaction type to measure value. I am kind of interested to hear who the other companies you are speaking about are. I do a fair amount of BPOs :)

AVMs simply cannot take into account many things at an individual property level, the data just isn't there, and many neighborhoods aren't cookie cutter. There are just way too many variables.

MAY

2010

Very interesting stuff. I read about this today and it made me think about NAR's new RPR program.

Zestimate makes virtually no sense in Sonoma Valley where we have only a few subdivisons and lots of older homes on various sized parcels in widely varying condition. It's really a problem for agents here because out-of-area buyers, of which we have many, have to be completely re-educated about local property values.

Hello:

I really like Sara from Zillow, but I think the zestimates are never really close at all compared to good ol' cmas.

Zestimates make absolutely no sense to me and I feel it provides consumers with what can generally be very inaccurate information. That than leads to issues for the licensee working with the consumer who has the Zestimate in hand. Tax records are not accurate and can be very misleading.

Sue of Robin and Sue

Amazing that they are fighting over a forumla that is about as accurate as throwing darts while weaing a blindfold....

I've gotten calls from consumers who believe they are accurate. It doesn't help when they are considering listing their home and want us to use their zestimates. I'd rather rely on the just or market value from the property appraisers office and I've had properties close for anywhere from 10-20K more than their values.

Ruthmarie is absolutely right, they are arguing over the recipe to poop. Automated property valuation is very limited in its usefullness, and the more specific the need, the less value it has.

To me it is just amazing that the general public wants to believe in a website over a local appraisal. I am looking forward to more news coverage on what happens in this lawsuit.

It's hard to believe somebody would want to patent the current alogrithm they use. I think a blog entitled "The Appraisal vs. Zillow" is in order. The same could be done with BPOs and CMAs.

Ron, it will be interesting to see what happens here. If they are using a mathematical formula and not true data, I don't see how it can be very accurate.

Everyone inside our industry knows that their Zestimates are worthless. However, Zillow has done a remarkable job marketing to consumers. It will be interesting to see how this plays out for sure. Zillow is on AR?

Zillow Response?

I say that it doesn't surprise me that their business model was found not to be unique. A company that manipulates other peoples data with a 'whisk' mentality. Definately not accurate and they just don't care! They are selling eroneous information and the public is being duped into believing it is accurate. Recently apologies from U.S. News and a few others are proof the numbers are not valid. The news groups are being duped into believing that these numbers are valid much to their current detriment. I like to use the words 'check & reverify' if you do that (MLS), you will find out the numbers are pulled out of a hat.

Give them credit for a fabulous magic trick.

It's unfortunate that so many people looking for comparison information take the Zillow estimates at their word.

Zillow has done a great job in getting the consumer to believe that "some website, on a computer, somewhere in cyberspace" knows more about home values in their neighborhood, than all of the real estate professionals combined.........

Well, I guess that all the MLS systems, including mine will be sued for providing automatic values on owners homes since that's basically what it does.

I think some judge somewhere up the line will toss this out as a suit without merit. I'm not sure you can patent a process, just the system that does the process and even then if it's something too generic I fail to see how you can keep anyone else from copying you. Happens all the time.

I swear the Honda Insight looks like the Prius from behind but I have not seen any lawsuit about that, yet.

They are "estimates"..Zillow does have accurate information as far as homes that are listed for sale with their for sale price versus what they think they are worth(estimate)..they do not make any claims that their zestimates are accurate as they say right in the name..they are an estimate..any of you who shun zillow remember this...you HAVE used their site, it is full of some great information, and it is a good tool for someone to get an idea of things..an "estimate"

Zillow doesn't help. The homeowner is confused enough trying to understand why their home has lost value, without Zillow adding to the confusion.

The Zestimates are just a thorn in my side. Every time I meet a new client I have to gently pull it out and hope it heals.

Ron,

Thanks for sharing this information about Zillow. I anxiously await the outcome of this brouhaha. Accordingly, nothing can take the place of an appraisal done by a qualified professional.

I just sold a townhome for 117K, appraisal came in at 110K, Zillow says $182K.

We have golfcourse lot premiums here that go for over 100K, view lots 30K.

North facing backyard covered patio in the 117 degrees of August - priceless!

Swimming pools ? Won't show unless the property was previously sold with it.

Casita or 3rd car garage - won't show at all in some subdivisions.

I explain to my clients that Zillow is NOT a non profit agency and is only as accurate as the limited info that they have access to, and the limited way that they use it.

A Zestimate is a guesstimate.

Oh, don't get my started on Zillow! They're so off in my area (usually very low) it isn't funny! Sellers should be suing them! As has been mentioned, even though Zillow explains that their Zestimates are crap, buyers don't want to read that fact. They see a home with a Zestimate of $268,000 (that I ended up selling for $330,000), and what does the buyer want to see? $268,000! Even if I go back to that buyer and say, look - this sold for $330,000, Zestimates are not accurate, that buyer is still going to think I found a stupid buyer.

I hope that this will end the battle I have with some clients who want to low ball property because Zillow said ya-da ya-da and they are almost 95% off. When I get into these spats, it creates more work to prove that Zillow is soooooo wrong. ARGH!!!

This is anohter reason that prospective clients should be using a real estate agent. We know the area and the homes that sell. How can anyone trust a machine that just kicks out numbers.

Hi everyone,

Spencer from Zillow here. I obviously can't comment on the lawsuit, but I wanted to respond to some of the other themes mentioned in this post and in the comments.

First, Zestimates are indeed imperfect, as many of you have stated. No one should be surprised by this fact. They're computer-generated, which will always be less accurate than a CMA or an appraisal. We don't purport them to be 100% accurate -- far from it. Heck they even have the word "estimate" in their name, for a reason. In fact, we report our own accuracy statistics each quarter on the website, and we're the only company who produces valuations which does this. No other company is as transparent and open about their accuracy: Cyberhomes, eppraisal, Realtor.com, and others do not come remotely close to Zillow in terms of transparency on accuracy.

In addition, we recalculate the Zestimate based on edited property attributes when we get new information from listings. So Zestimates improve as we get more listing information on the website.

Finally, just last week we launched a feature where an agent or an owner can comment on a particular home's Zestimate. (This is also something that no other website which produces valuations has.)

Automated valuations aren't going away. In fact, they're about to become front and center: your own Assocation (the NAR) is getting ready to launch their own AVM which will appear within Realtor Property Resource (the Realtor-facing website). They're doing this because they realize that AVMs are important, albeit imperfect. This is also the reason that the NAR's consumer-facing website (realtor.com) also has AVMs on it (it's just that no one ever talks about those valuations because Zestimates and Zillow have all the consumer buzz!).

AVMs will never be perfect; they're flawed by their very nature. Zillow strives to make ours as accurate as possible, but it will always have shortcomings.

What separates successful agents from unsuccessful agents is how good a job you can do explaining your expertise to a client and positioning your expertise relative to what a computer-generated valuation says. In short, many agents use the Zestimate very successfully to gain business. Those who just complain about it and wring their hands in frustration are making a mistake. Use it to your advantage instead of to your detriment.

I was wondering when a Zillow rep would stop by. I've seen this response many times over. You blame those of us who complain because we are unable to tell buyers what a crock the Zestimate is. Oh, but I do tell buyers - you see, I have actual proof.

What you will not concede is what many of us are saying here, buyers want to believe a huge, national real estate portal because that Zestimate was their first impression, which we agents now have to work even harder to dispel. They do not read the small print about Zestimate = estimate. If they like the lowball Zestimate, this is what they want to believe. It's human nature. (Same with a seller with a high Zestimate - they'll be inclined to believe that because it's what they want to believe - fact or not).

And now there's a place for agents to have to explain why Zillow is valuing a property too low - I can just see buyers snickering about that agent or seller "blowing up value". I can see buyers viewing that as a box of lies or excuses on why the asking price is so much higher than the Zestimate. They feel, "It's a buyer's market, therefore the lower Zestimate must be correct. So now agents have to defend their asking price. Thanks for the extra work.

I hate Zillow. So inaccurate and consumers feel they know the market based on using zillow. I've had to correct many a buyer and seller with regard to zillow.

Have you guys - or you Zillow - ever read the "Zestimates Value & Accuracy" page - if you can't find it look at the VERY bottom - text is very light gray - It's bascially a "we're pretty accurate, but not always accurate, I mean sometimes we're accurate, but sometimes we're not, it all depends on how much data we get, and if we don't have enough data it's your city's fault not ours, but we're going to go ahead and say we are pretty dang accurate....if we do say so ourselves"

My biggest headache is people finding a house on there that has sold a year or so ago and is still showing active - our office has a statement from them admiting to inaccuracy in data - anytime we have clients that put their right hand on the Zillow bible - we hand them that statement.

-Malita Jones

By the way - Realtor.com doesn't include an opinion on a home value - if they do please correct me. And that's ultimately what these sites need to understand, they are STATING their OPINION on a homes value - and very inaccurately

-Malita Jones

So they are being sued for stealing a method of coming up with bad property evaluations? That's like big banks suing people for fraud.

I agree with Judy Orr. Another Zillow rep has also posted a blog entry on why address are withheld. I tried to explain, but she went on the attack. Oh well. It is funny how they say our job is to convince consumers that they are not accurate and we are better. Why are they telling me this? And why should I have to spend what little time I have trying to convince a customer that the estimate from a site is not right? Makes me look a bit silly when my customer says "Then why is my home on that site if it is so bad?" Well, it is there because the site has grabbed it from another site without my permission and even though I am the agent and my client does not want their property displayed on a auto-valuation site, I have no opt-out capability. In any case, I am done with the silliness of this problem and will let the old "what goes around comes around" philosophy have its way. And if a customer continues to insist, I recommend that, as with many unknown companies, it never hurts to see what the Better Business Bureau has to say. An unbiased source of information can often be beneficial.

Hi Malita & others,

NAR's consumer-facing website (operated by their partner, MOVE Inc) has an automated valuation model which is a knock-off of the Zestimate. You can find it by going to the homepage of Realtor.com and about halfway down the page on the right side it says "Find home values". Click on "Go" and it will take you here.

Now type in any address and you'll see almost exactly what you'll see from Zillow: a computer-generated valuation from your Realtor's association. At the top of the page it proudly states "Official site of the National Association of REALTORs." Here's an example. Their "estimate" does not show its accuracy, it doesn't have a value range, it doesn't allow the owner or agent to comment on it, it won't let you change the property attributes to recalculate it, and in fact it hasn't even been updated since March 20, 2010!! Zillow's valuations on the other hand have all of those features, and are updated 3 times per week. We have disclaimers explaining that Zestimates are imperfect, and we disclose our accuracy.

If you are all going to rail against automated valuations, you should tell your Realtor's association that they're not doing you any favors by posting valuations on their website which are two months old.

It should be interesting to see what happens. I agree with many above that Zestimates are not as accurate as one might hope in many cases.

MAY

2010

I got a call for a listing appointment and the seller was telling me how his financial adviser had already told him what is home was worth and then went on a tirade about how he lost all his equity. I asked where his adviser got his information and he said the adviser knows the market area. I explained I would show him my CMA at our meeting, but just for fun I went to Zillow to see if their data matched what this person said. Amazingly it did right down to the individual pieces of property he quoted. It took 45 minutes to convince him that the information I was giving him was more accurate then the information his adviser had pulled even though I was showing him a higher value. It's scary what is perceived as reliable information.

It will be curious to see how Zillow and the others do business over the next couple of years. Realtor.com needs to step up the service and reduce the cost to the REALTOR.

I too am pretty sick of Zillow haunting threads with the same old, same old tired arguments. If you aren't offering something of real value (and in this case it is accurate information) then you are not providing a valid service.

Ruthmarie, any thoughts on NAR's valuations appearing on their official website (Realtor.com)? Don't you find that a bit strange?

The world is sue happy. Where will it end. How many people can I sue? I could just quit working for a year and start a lot of law suits. Maybe one of them would take.

My colleagues, I have read the majority of your comments which leaves me little to say that has not been said. I too believe that ZESTIMATES have little useful function. Even Spencer Rascoff (Zillow) made some reasonable points. I expect that Zillow's attorneys may use the gross inaccuracies as a defense in the law suit. To which First American CORELOGIC could counter that it is not the predictive value that they were deprived but the entertainment value. So perhaps Zestimates do have some worth.

Bill

MAY

2010

Spencer,

I am no more a fan of Realtor.com than of zillow. BOTH of you have shown yourselves to be pretty much useless. In order to be useful, you need to perform useful service for the agent/broker or consumer. But your sites really don't do that. So at the end of the day both of you are merely middle men trying to stuff your pockets with a slice of each transaction. Realtor.com treats the agent like a money cow. You are trying to find a way to treat the agent like a money cow. It's the same-old, same-old in a different guise.

The sizzle of the zestimate drives consumers to your site. Being valuable is very different from being popular. In truth you offer virtually ZILCH of value to the consumer.

I think John Elwell (#70) said it best. Why should he have to spend his valuable time convincing people that Zillow zestimates are about as accurate as shooting darts while blindfolded? The pretzel logic that is being used to say the agent must prove their value by disproving the zestimate with their comps is ludicrous. To make matters worse, as John points out, we are placed on both of these sites either because the listing was grabbed from another site or because all listings go to that site. Either way the choice isn't ours or even our clients.

There are serious implications to the zestimate inaccuracies. I think at some point you guys may face a massive class-action lawsuit. Zestimates have impacted the ability of some sellers to sell their homes at fair market value. At the very least, they have cost sellers time and money with increase DOM. Buyers too, may have been impacted because I have seen zestimates work in both directions. Disclaimers aside, your site has proven costly for consumers and a day or reckoning can not come too soon in my zestimation.

MAY

2010

Per Spencer from Zillow - Realtor.com has the same estimate. Here is what it say when you arrive at their value:

From Realtor.com : An Estimate represents a computer generated value based on publicly accessible property records and should not be used as an appraisal report. A REALTOR® specializing in your area will be able to provide a more accurate valuation based upon current market trends and specific property and neighborhood characteristics. To get a Free Home Value Report from a real estate professional specializing in the area click here. We are continuing to enhance the valuation algorithms that determine the estimated property values. Learn more...

Seems to me to be the same thing except without all of the disclaimers that come with a zestimate.

Leave a response…

Name:

Email:
(optional)

Comment:

What does the graphic say?

Ron Tarvin, Broker Katy, Houston, Cypress 77450,77494,77095

Katy, TX

More about me…

Luxury and New Construction in Katy & Cypress TX

Cell Phone: (281) 935-7152

Email Me

Listings

Links

Archives

Find TX real estate agents and Katy real estate on ActiveRain.

Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.