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Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

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Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#141

Post by BeetleB »

leftandright wrote: post #120
BeetleB wrote: post #48

Earlier quoted context omitted.

>I wonder what would her argument be if Zillow simply reported the City/County tax assessors estimates which are usually even lower than Zillow's. County assessors for tax purposes are explicitly not trying to determine market price. Zillow should ignore it.

I'm not sure what you mean. In Illinois (the state from the article) the assessor is calculating the market value: Most real property in Illinois must be assessed based on its value on the open market, or its “market value.” This value is the amount at which a property would sell in a competitive and open market... [1] [1] http://tax.illinois.gov/Publications/LocalGovernment/PTAX100...

Then it likely varies from state to state - or county to county.

See http://www.investopedia.com/articles/tax/09/calculate-proper... for different methods used. As an example, some places merely look at the cost of replacing the house if destroyed.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#142

Post by peter_mcrae »

EpicEng wrote: post #104
wuliwong wrote: post #60

Earlier quoted context omitted.

Usually this is mitigated by the appraisal. Lenders generally aren't willing lending more than a home is appraised for because of the increased risk. I'm sure this varies from state to state but I think this holds mostly true in general. That being said, the appraisals themselves are quite subjective and only based off a few similar properties sold recently, so I still agree it's a difficult problem.

Appraisals magically come in at the exact offer price unless the offer is just completely off the charts insane. Appraisals are often times BS or, at best, just whatever you need them to be within some rather large margin (+/- 10%? 20%?).

Sadly, my appraisal came in "magically" at list price, so I had to put down a lot more at close. It was 3 years ago so we've done well regardless. I think you are right, I'm pretty sure the appraisal is just a guess. Most people I know had the appraisal come in way high, so maybe I got the one honest person.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#143

Post by djrogers »

2muchcoffeeman wrote: post #127
tehlike wrote: post #100

Earlier quoted context omitted.

Yes. Some known realtors underprice the property to start bidding war. The foreign money in the hot markets also doesnt help. It sucks to see a house list for 2.9m and sell for 3.7. it happens quite often here in the bay.

In Australia a law was introduced where realtors had to provide realistic values for property that went to auction. Before that if you were looking at 2 bedroom apartments, around Sydney, you'd just mentally add 400k. Not sure if it's better now or not.

The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US.

The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#144

Post by jcranmer »

razwall wrote: post #137

Take a look at the law they're suing under, regarding licensing of real estate appraisers ( http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=02250... ). It makes it illegal to "develop a real estate appraisal" without a license. An appraisal is defined as simply "an opinion of value". So if you are driving down the street and say to your spouse, "Look at that house, it's gotta be worth a million bucks," you jus…

Illinois is a common-law jursidiction. Any judge would laugh you out of court if you claimed an off-hand comment on valuation was an appraisal.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#146

Post by hbosch »

ProfessorLayton wrote: post #66

At least in the Bay Area, Zillow et al. are decent for getting a decently accurate ballpark figure in mind. A lot of sale prices are clearly put up below market to grab attention, knowing that the sale price is very likely to exceed it by a wide margin. Here in many parts of the Bay, you'll get laughed at and promptly ignored if you try and use these "zestimates" to try and put downward pressure on the price. Sellers…

A friend was looking at houses via Redfin. The agent told him on day 1 that he should expect to spend 10%–20% more than the online quote, as a rule of thumb.

Since then I've taken "Zestimates" with ~65,000 to 100,000 grains of salt.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#147

Post by scott00 »

lotsofpulp wrote: post #10
cavanasm wrote: post #5

I wonder how many other tech companies fit into this general category of "providing an equivalent to a regulated service without meeting the regulations". You've got the more obvious "sharing economy" type things which are in the news all over the place lately, but I bet there are a bunch of other companies like Zillow that have been flying under the radar for a while.

If a homeowner or homebuyer is paying someone to assess the value of a property, requiring expertise and training in inspection of a house such as materials, build quality, plumbing and whatnot, I could understand needing government approval. This is just someone saying what they they think something is worth. Do I need a license before I can say "I think a certain car is only worth $25k instead of $30k"?

The actual Illinois law covers real estate appraisal, not other kinds (ie, cars). However, it defines an appraisal as the act of forming an opinion about the value of a piece of real estate. It then forbids doing it without a license. Not doing it for money, not communicating your opinion, but forming it. There are explicit exceptions for realtors, banks involved in real estate lending, and for private use (ie, appaising your own house).

So I would say Zestimates are clearly illegal according to the plain text of the law. However, I suspect this is one of those laws where a judge would find a convoluted reading to support his or her gut opinion that finding Zestimates illegal is ridiculous. I think you could also make a pretty reasonable claim that the freedom to form an opinion about the value of something is an unenumerated, but nonetheless inalienable right, and therefore the law is unconstitutional.

Not a lawyer.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#148

Post by WaxProlix »

djrogers wrote: post #143
2muchcoffeeman wrote: post #127

Earlier quoted context omitted.

In Australia a law was introduced where realtors had to provide realistic values for property that went to auction. Before that if you were looking at 2 bedroom apartments, around Sydney, you'd just mentally add 400k. Not sure if it's better now or not.

The properties in GP's post are not likely to be sold at auction - very few homes are sold that way in the US. The 'bidding war' referred to is a standard listing/sale that receives multiple offers. If the interest is high enough, the seller may counter all of the offers and reveal the highest price, forcing the bidding.

Even without revealing the highest offer, the offers themselves constitute a silent auction, which is where a lot of the information asymmetry comes from. If I could speak to each of the other people and tell them I had X amount to spend we could all agree to walk away or make offers without going through a bunch of hassle and (for 32 of 33 offerers) heartbreak. The process really highlights to me how broken certain types of 'market' can be when there's a monopoly of information.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#149

Post by razwall »

jcranmer wrote: post #144
razwall wrote: post #137

Take a look at the law they're suing under, regarding licensing of real estate appraisers ( http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=02250... ). It makes it illegal to "develop a real estate appraisal" without a license. An appraisal is defined as simply "an opinion of value". So if you are driving down the street and say to your spouse, "Look at that house, it's gotta be worth a million bucks," you jus…

Illinois is a common-law jursidiction. Any judge would laugh you out of court if you claimed an off-hand comment on valuation was an appraisal.

I agree. So where is the line between an "off-hand comment" that's not subject to the law, and an appraisal that constitutes a misdemeanor? Is it illegal if you post your comment on Facebook? Or on your blog where you talk about various homes for sale in your neighborhood? Or only when you start charging people money to hear your opinion?

A citizen cannot look at the law and figure out if they're committing a crime, which is why I said the law is unconstitutional.

Re: Zillow faces lawsuit over ‘Zestimate’ tool that calculates a house’s worth

#150

Post by desdiv »

saimiam wrote: post #99
desdiv wrote: post #47

Earlier quoted context omitted.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" -Upton Sinclair Zillow has an accurate estimate somewhere in their database but it's not in their financial interest to make that estimate public. By low balling, they both gain more buyers and gain more sellers.

Is this true tho? If a product is always under priced, what incentive does a seller have to put it up for sale? For any market to work consistently, the market maker has to be basically neutral, imho.

It's basically the same strategy as Yelp.

When there's a string of bad reviews on Yelp, it's basically Yelp's way of telling the shop owner: "Gee, doesn't it suck that these spammers are bad mouthing your business without actually patronizing it? Well, if you work with us I'm sure we can weed out the spammers and only keep the honest (read: positive) reviews."

In this case, it's: "Gee, it's regrettable that our Zestimate for your house is so low. Only if we had a better source of data. Well, if you work with us I'm sure we can get a better (read: higher) estimate that's more in line with the true value of your house."

The buyers will flock to whichever market maker that advertises the lowest price, in this case Zillow. This in turn forces the seller to choose Zillow as well since that's where most of the buyers are.

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