A class action lawsuit against ZILLOW regarding the "supposed" ZESTIMATE system values assets! It's probably…
A class action lawsuit against ZILLOW regarding the "supposed" ZESTIMATE system values assets!
This probably had to happen: a class action lawsuit was filed against online real estate giant Zillow (and 5 other real estate sites), claiming that the company's controversial "Zestimate" tool consistently values homes below their true market value, which created " A huge roadblock ”for their sale by homeowners.
The lawsuit was filed in Cook County, Illinois. The lawsuit alleges that despite Zillow's denial that ZESTIMATE is an "appraisal", the fact that they themselves "promote it as a tool for potential buyers to use the asset market valuation" shows that they meet the definition of "appraisal" under state law. Not only must Zillow be required to obtain an appraisal license in order to make assessments before she publishes them, the prosecution argues, but she must obtain “landlord consent” before she can publish them online.
Zestimate's capabilities are fundamental to Zillow's business model as it attracts millions of home buyers to the site, enabling the company to sell advertising space to real estate agents. Zillow makes big money with its Zestimates: In the first quarter of this year, it reported revenue of $ 245.8 million - a 32 percent jump from the year before - including $ 175 million in payments from Premier agents, who pay for advertising on the site.
According to Zestimate, Zillow "is not an estimate", but is "Zillow's estimated market value" using its proprietary formula (an algorithm developed by Zillow). But there are serious problems as a result of Zestimate's error rate: in about a quarter of cases, their estimates are incorrectly 30 percent or more than the selling price, and incorrect in 20% or more in 10 percent of cases. A 10% error rate may sound modest, but when calculated as median sales, the errors can reach tens of thousands of dollars, hundreds of thousands in upscale areas.
Now ZESTIMATES are not enough for ZILLOW - they are now buying and selling properties. Zillow is no longer content with managing the online platform where there is a link between home buyers and sellers; ZILLOW recently entered the buying and selling process itself through a venture it calls “Zillow Offers”. The company offers sellers to buy their homes immediately in the hope of making a profit in "FLIP" (quick sale) to buyers. Zillow offers sellers a cash transaction and commission in the range of 6% to 9% of their Zestimate. This means Zillow - there is an interest in valuing the homes they want to purchase at lower market rates. This point was cited in the lawsuit as a significant conflict of interest.
The class action is expected to amount to 300 million.
The class action is expected to amount to 300 million.
So what can you count on when valuing a property?
The only process accepted in the market (both by banks that want to determine the mortgage amount, and also by brokers who want to buy or sell a property) is called "Comparable Market Analysis" (COMPS for short).
To accurately assess a property, we must send an experienced realtor or licensed appraiser to actually visit the property, check in and check it from the establishment to the Tefahot. He will check how the house is maintained and if renovated, to what extent and quality. It will then check the quality of the neighborhood, as well as similar homes sold over the past 6-12 months. Based on these field tests, it will make an accurate valuation of the property as much as possible. The banks rely on this to approve a mortgage and what is good for the banks is good enough for us too.
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The data on the Zilo site cannot be relied upon at all
Alex Dumsky
Avishay Hekelman
Itay Kalev
Tomer Dahan