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Zillow Gets Zinged

A consumer protection complaint has just been filed with the FTC against Zillow by the National Community Reinvestment Coalition (NCRC). They allege that Zillow, the "Internet financial services and real estate provider(sic) is misleading consumers, real estate professionals and financial service providers in online home valuations."

Uh oh....they go on to charge that:

"Zillow is placing the American dream of homeownership at risk for countless working families," says John Taylor, NCRC President and CEO. "For a company that represents to consumers that they are the 'Kelley Blue Book of Homes,' this is a very dangerous situation. We call upon the FTC to intervene and ensure that Americans receive accurate appraisals and valuation information to protect the single most important investment of their lives: their home."

The full story goes into much greater detail. I am still digesting the ramifications (if any) of this complaint--and the purposes behind it.

Thoughts and concerns?

....and for an accurate picture of the San Diego real estate market, go to http://www.sandiegopreviews.com/

How's that for shameless self-promotion>

Posted by Roberta Murphy - Carlsbad Real Estate North County San Diego Realtor on 10/26/2006 01:26 PM

Comments (58)

zillow, san diego market conditions, ftc

This post has been included in California Information San Diego County, CA Information San Diego, CA Information

58 Comments on Zillow Gets Zinged

OCT

2006

Wow! Breaking news I heard it here first.

Just last week Realtor.com's Dalton's criticism seemed a bit harsh....

I've tried Zillow on a few properties and thier results seemed to be way overvalued.

Great post Roberta...

-James

I really hope Zillow doesn't get shut down! I think it's a great resource. Maybe they'll just have to put loads of disclaimers in BOLD on their main page.

I could see why some people would have their nickers in a twist over them.

I haven't found Zillow to be anything more than a fun toy. It has little relevance to values in the areas where I am selling.

The concept of a "Blue Book of Homes" is way off track. Just looking at two homes side by side will confirm that.

Homes are different, lots are different, maintenance happens or not. How can one use these numbers with out knowing how they were arrived at.

The potential for mistakes is infinite.

I know that here in Texas the values are pulled from county tax records and this is nearly never the market value. I find that in itself very misleading because the less savy do not realize this and think that is the value of the property. Not certain how values are determined elsewhere in the country.

I did some searching of priceing on their site they are way off base on homes I know about and have sold.

Zillow is OK as a reference in my opinion, but any reliance on the data therein is stupid (for lack of a better word).

I have researched my own home on Zillow and found it overpriced some days and underpriced others. For example, the home across the street that is exactly like mine in style shows a higher price than mine. What blows my mind here is that it is on a dry lot while I have a nice lake view and more acreage. How can that be accurate?

Buyers beware!

How do you deal with a potential seller that has already looked at this site and believes that their house should be worth more than what your professional opinion their house is worth?

Interesting development. Perhaps they put the marketing cart before the technical horse?

Thanks for posting - I saw a note about this in my surfing. Can't say I am surprised. Everyone, at least the agents, seems to feel that Zillow's estimates are, for the most part, inaccurate. Their claims, unfortunately are misleading, and consumers will likely only see the headlines and not the fine print, so disclaimers will likely be overlooked, or not understaood. But perception is the reality for most.

While Zillow is usually wrong in my little corner of the world, it is still a fascinating technology. I think it is a bit over the top to say it is placing the american dream of homeownership at risk. It is an emerging technology that will improve over time. BUt it must be given the time to improve.

Great information! It's been our experience that homes have been overvalued in zillow as well.

Jay and Linnea Hanley

I too have seen home values way off on Zillow.

I'm also in Texas, and I've found that their information is WAY off most of the time. Again, based on tax values, which are to laugh here, and sometimes apparently on nothing at all. To me, it's not a "great service" at all - it's a "great disservice" to potential sellers and buyers because it is misinformation.

As to how I deal with folks who have already played with it, I simply do a real CMA for them and show them the real comps, while pointing out that Zillow's information is "in error". I can usually get the real information on the comps they've come up with from Zillow, and the dramatic difference there usually does the trick.

Word's getting around, though. I've had folks tell me up front that they know that Zillow's way off, before I have to do that.

Just a matter of time before something like that happened and I am sure there is more to come. I have zillow and trulia on my site, (with a disclaimer) they are up and coming and are going to change things, already are...just like when realtor.com came out, all Realtors hated it. I agree that zillow is a fun toy and it is...I think Rick Bartons mother was or is a Realtor..so maybe he likes us? Will be interesting to see how things play out, everything moves so fast now, it can't be stopped, in my opinion.

My company recently sent us the industry insider email for this topic. Hope you find it more informative.

Zillow: The Latest Home Valuation Website

Real estate valuation tools, such as PropertyValueHUB.com (www.propertyvaluehub.com), domania (www.domania.com) and HouseValues (www.housevalues.com), have been on the Web for some time. The latest in this family of consumer-oriented sites is Zillow.com (www.zillow.com), brainchild of Richard Barton, ex-Microsoft executive and founder of Expedia.com.

Zillow has been lauded for its ease of use but rebuked by some in the realty profession for arming consumers with valuation information that often contradicts professional appraisers.

How it works. Visitors simply supply an address, and Zillow spits back a "zestimate" -- a home's value as determined by Zillow's proprietary formula. According to Bloomberg.com, the zestimates use an algorithm that takes into account public information about a house, such as number of bedrooms, bathrooms, square footage, lot size, year built, prior sales and tax information. The zestimate is pasted on top of a satellite image of the home's location. Also available is the home's sales history and links to neighboring houses for comparison purposes.

You also can add improvements to project how they would increase the home's value. For example, what would a three-bedroom, three-bath property be worth if you tacked on another bedroom and 500 square feet?

Talking to clients. Experts criticizing the accuracy of the Zillow data point out that local tax-assessor records are slow to update and can be rife with errors. Also, Zillow can't take into consideration what a professional appraiser finds on site, such as upgrades and views.

With 2.8 million people logging on to Zillow in February 2006 alone, real estate agents should be prepared to answer questions posed by Zillow-using home seekers.

"With 2.8 million people logging on to Zillow in February 2006 alone, real estate agents should be prepared to answer questions posed by Zillow-using home seekers. "

Maybe not for much longer. If the FTC finds the allegations true, the potential fines could be the end of the company. Either way Zillow is going to go through a major overhaul regardless of the result. Whether the home valuations stay is another matter. -Charles

Z has been misleading the public since the first day it went live on line. I've had to fight with buyer callers for months. Folks believe what they read on the Internet.

I read the Complaint. They are seeking an injunction. I would suppost that they are going to try to get class action certification. Yahoo has deep pockets.

Lenn

Earlier this year I had my house valued by 4 different agents; all submitted CMA's. The top price came in $75,000 above the lowest valuation. In a ~$550,000 dollar home that's up to a 13.5% degree of error. I say no more.

Would love to see Zillow have to answer for their inaccurate values. The disclaimers aside.. they are trying to set themselves up as a major resource for determining market values instead of a local agent. It's only a matter of time until they either start selling leads to agents or try to set themselves up similar to Redfin. Don't be misled, Lloyd Frank believes he can sandbag real estate agents the same way he did travel agents

Jessica,

Are you saying Realtors are about the same as Zillow? I would have to agree. The price gaps between companies here is amazing.

OK. I have just played around with Zillow on 3 of the properties that we have listed. We are usually spot-on with our CMA's- perfect market value. The Zestimates were OVER by $300k on one home, $25k on another and $17k on another. How can Zillow set homeowners up for disappointment like that?

That is absolutely ridiculous. Should we burn any books that slam markets where people are trying to sell their house as well? Course, Zillow being created by a Microsoft VP makes them an easy target for lawsuits.

Kaye - David from Zillow replied See here

Roberta, I wrote my article was about to post here and I saw yours on AR. Great pick up btw. By David From Zillow replied to the complaint and the actions. I also included your post on my blog and well as Maureens.

Lenn, Microsoft has bigger pockets!

I agree with Kristal Kraft, at least in the third part of what she talked about.

Blanca.... very interesting in your one comment. I am not a realtor, but in the mortgage industry, people will ask this also....if the value is less than what Zillow shows. I tried my house and they were off $200,000. The problem here if they are using tax-assessors values. It's not the assessors fault that they are behind. That is why we have realtors and appraisers. I never truly believed in this site. It leaves too much room for error. ANd I know too many investors that use this and like it.

Overall... people need to be educated about this. thanks for a good post Roberta and the info.

Right around my little corner of Los Angeles, the Zillow estimates have been fairly accurate. Mostly within the 10% more-or-less quoted by Zillow. I, for one, would be sorry to see them go. When looking at properties, we sometimes run the Zestimate to grab a quick "ballpark" starting range; then we fine tune the value with our own expertise from there.

Blanca: If I'm not mistaken, housevalues.com, domainia.com, and propertyavluehub.com all operate differently than Zillow. They require a consumer to input personal contact information, which is then sold to a member real estate agent as a "lead".

Zillow does not require personal contact information from users, and (at least so far) does not sell "leads". Which makes them a cut above the other guys in my book.

(Yikes! I've failed them human test twice in a row!!)

P.S. to my previous comment:

Here are two other Property Valuation webs sites that do NOT require personal contact information and do NOT sell leads:

http://houseamerica.com/

http://www.realestateabc.com/home-values/

WOW Heard about it first on this blog. I am glad to see that action may be taken...I don't know how any times I get asked from clients what I think about zillow. I seen many overvalued homes on this site and think consumers should be aware of it;s downsides. Thanks!

Yea, thanks so much for the blog. I knew somebody had to knock them down for what they were letting the public do.

Blue Book of Homes? It is tough for any one entity to proclaim themselves as that. I have found that Zillow is under and over what my opinion of local homes are. But, whether you like it or not, Zillow isn't going away. It is a topic of conversation buyers and sellers will inevitably bring up.

I find it helps me show more value in what I do. When you can show a client why you have priced their home at a certain price, then show them how general Zillow can be, it brings more value to your realationship. I just try to put a good spin on on an otherwise irritating subject.

As we all know......Zillow is controversial with Realtors. Why not go with the flow. This can be a tool we use......not the end all be all, but a 2nd reference point..

The analogy I use is that Jeffrey Citroin revolutionized the stock market with online trading(Datek Online) and then he moved onto VoIP with Vonage...this is the same premise......

As REALTORS, this industry will also have changes.....You must embrace these changes or you will not survive.

In our neck of the woods, Zillow is way off also - but in the opposite direction. It has been off by $200K - one home it stated should be $219 and it just sold for $419 last week - in less than 4 days!

Very interesting. I did a Zillow on my house and it came up worth $300K ,,,wow,,,, not bad since I built it for $475K plus the land and it was appraised @ $750K when I completed it! Zillow is horrible on values! They had a house 1 mile away 1/2 the size for more than my house, there is not a house on my street worth under $550K

Christine: I went to your blog and posted the following response to David G from Zillow:

David: In securities there is the standard disclaimer:

"Past performance is no guarantee of future performance...." Perhaps the same warning should be attached to all current real estate valuations. It is hazardous to project current value based on prior closed sales. Many of those prior buyers are now underwater.

Nice blog!

OCT

2006

Thank heavens! It's about time! Now, let's get some of these lenders and will have made a dent in some of the inequities that are prevailing. I wondered how Zillow could get by their values...care to wager on how long it will take for Zillow to go down!

I think someone should Killow Zillow. Looks as though they may end up causing their own demise.

Great post. Maybe effective legal action will inspire other house value sites with more incentive to clean up thier sites to be a more reflective of actual values.

Is Zillow truly impacting your abilities as realtors? I find most people (not in the industry) understand its limitations and just use it as everything else on the web. Just more info.

Very interesting, Ive used them a few times as well, and I think its a great resource for individuals to get started.

Zillow to me is somewhat like a book for all seasons. The rpinciple sounds nice and that it will work. But in practical application it does not. Afterall its bases isn't market specific.

Rob Robinson wrote "Is Zillow truly impacting your abilities as realtors? I find most people (not in the industry) understand its limitations and just use it as everything else on the web. Just more info."

Consumers run the gamut from those that don't have a clue and those that take it as gospel just like anything else on the web. I don't think the issue with the NCRC is REALTOR® driven.

Some REALTORS® have embraced Zillow for marketing and other's think it is the devil's work... I personally swivel back and forth but am always aware of what is happening with Zillow. I'd say the reception at CAR last week is an indication of how we act as a mob. I believe Lloyd Frink was jeered. Allan Dalton's speech was supported by the crowd from what I understand.

Mob mentality. Hive thinking.

I too hope Zillow doesn't shut down. I use it to build my case on why consumers need me!

"I too hope Zillow doesn't shut down. I use it to build my case on why consumers need me!"

Lisa, excellent point. If in fact Zillow is 'off the mark' in your particular area.....it can be a great selling service to you as a Realtor, to EDUCATE the client as to 'the evils' that lurk on the web, misinformation, 'limited' information, etc.

I love the "kill the messenger" attitude that many realtors have. Is Zillow great? No. But, it isn't going to destroy the real estate industry -- unless we allow it too.

The agents that use "information" as their primary selling point for a listing are going to go away. These agents are going to be replaced -- if they haven't been already.

But those that welcome consumers that are more interested in how you are going to serve them, will survive and even prosper.

Look at the travel agents, what did they offer beyond information? Not a lot. Those that did are still around, those that just sold you on "knowing" about places you didn't are gone and serving you coffee at the local diner.

This is just my take, but once again a class example of lack of personal responsibility. Zillow is a neat, general tool or barometer, not a concrete idea of value. If people want to know what their home is worth, get an appraisal done! Any professional who uses Zillow to put deals together should probably find another line of work. Zillow is neat, but not concrete.

Zillow is a waste of space. As a test I have tried it on 50 recently sold homes and the value was at the closest 8% off and the worst 39% off, and on average 18% off. That is WAY to much to act like the numbers are of any value.

Had planned to write a blog post about it, but decided that it wasn't worth my time talking about Zillow yet again.

Toby, most travel agent now work in call centers and are paid the wages you would expect to go along with that. Not really the best example IMO. With that said I have always taken a service professional approach to this business, not an information provider one. There is a big difference that most agents don't understand.

Still think Zillow is a bad thing as it misleads consumers and if we provided data that was that far off we would also end up in a lawsuite wouldn't we? I know I would in my area, so why should Zillow be held to the same standards?

Mapquest would get sued every day.

I agree! The homes on Zillow are drastically overpriced in our area. Consumers are looking at this information and it's up to us as Realtors to educate them. Personally, I wouldn't mind there either being a huge disclaimer posted on the home page or the site being shut down. No big loss to me or my clients.

I think NCRC is overreacting. First of all, Zillow is a work in progress and a 10% range is very forgiving. I have never heard Zillow suggest they would replace Realtors or Appraisers. The service is just a snap shot and sometimes can bring sellers back to reality. Based on the background of the two founders I would expect to see lots of improvements very shortly. Currently, they are just using recorded sales. When a Market is slow and prices are falling, it takes a while to adjust. That's where we come in. It was'nt designed to make our job easier.

Let me just say how surprised I am:

http://activerain.com/blogs/reibroker/tags/zillow

Work in PROGESS?!?!?!

So if I charge 10 points at closing can I just claim to be a "work in progress"????

Social responsibility. That's what we're really talking about. Something the Dixie Chicks don't comprehend either.

Good article, hope they get what they deserve.

OCT

2006

The real estate business will always be a people to people business. As far as home values are concerned, nothing will every take the place of a certified appraisal by someone physically inspecting the property.

Ken - I agree there is a lot of difference between us and travel agents. However, I think that the "Zillowites" of the world believe that they can take-over the industry in much the same way they did the travel industry. And someone else made the connection earlier in the thread.

Unfotunately, one of my best friends from high school went to school to become a travel agent -- and she is a waitress at the local diner. But, I'm sure that most of them have moved into other service industries.

NOV

2006

Before Zillow can take over anything, they're going to have to do what they claim to do now a whole hell of a lot better.

In my neighborhood, the estimates on Zillow are so far off it's a joke. I remember the big PR splash they made when they launched and people on our street were actually talking about it in casual conversation. I was shocked. But they all had the same thought... their numbers aren't right. Well, if the numbers aren't right how are you going to find the right numbers?

A Realtor. Period.

An appraiser, Jeff, an appraiser. They are our bestest buddies.

MAY

2008

I always thought Zillow was overrated

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