Zillow.com Accused of Purposely Misleading Consumers
October 30th, 2006
Written By: Adam Sussman
Update: Zillow responds to ShandyKing to clear up name.
It was only just a matter of time before people started to officially complain about Zillow. The National Community Reinvestment Coalition has filed a 12 page complaint with the FTC.
According to the National Community Reinvestment Coalition, an alliance of more than 600 community-based groups working to ensure equal access to credit services for underserved communities, Zillow knowingly provides inaccurate estimates in posting valuations on more than 67 million homes around the nation. CNN Money
Zillow.com launched about 8 months or so ago providing free tools to help homeowners and would be shoppers determine the values of property. The problem with this service is that people were taking Zillows estimated values of homes or “Zestimates” at face value and borrowed against these numbers.
According to CNN, Zillow could be off by as much as $80,000 causing home buyers to overpay convinced they are getting more valuable house for less. Even though Zillow claims on their website to have an accuracy of plus or minus 7 percent, the NCRC claims it is more like 30 percent.
According to the Los Angeles Times, the website “is increasingly being used to convince borrowers that a property is worth a certain, inaccurate amount,” said John Taylor, president of the National Community Reinvestment Coalition, a Washington, D.C.-based nonprofit organization that works to get credit and capital flowing into traditionally underserved communities.
There are so many issues here I don’t know where to start.
Zillow came out during the height of a huge housing boom. Combine the data Zillow offers uneducated users and a booming housing market; we end up with a bunch of misinformed borrowers taking large cash-out loans to upgrade their homes against their unconfirmed home equity.
While house shopping with my wife we have noticed an increase of realtors directing us to Zillow and have seen how people are pricing their houses out based on these estimates.
I love Zillow for the fact it is a free site offering general information. The problem is people take their estimates literally. It goes to show a little knowledge is a very dangerous thing, especially in hysteria of bubble markets.
I have been reluctant and holding off to buy property here in Los Angeles as I expect to see the market crash quite a bit. I believe those who took adjustable rate mortgages on homes that were overpriced by as much as 50% or more will have problems as their interest rates increase. There are far too many people who got in homes that are well beyond their incomes and I expect to see these people fall into foreclosures.
October 30th, 2006 17:18
Hi ShandyKing, it’s David G from Zillow.com
I hope I can shed some light on these claims.
Zillow is a research tool.
The claim that consumers have “borrowed against these numbers” is not only false, it’s theoretically impossible. Don Kelly of the Appraisal Institute was quoted today as saying; no banks use Zillow’s Zestimates when writing mortgages. Regardless of what a homeowner might believe their home is worth, it’s the lender that decides whether to grant the loan.
Zillow educates the websites users about what a Zestimate is (and is not).
We measure and report on our accuracy for each county in the US. That data is available to all users of Zillow.com - prominantly - we link to it in the search box on our home page. Next, our help content explains Zestimates and their accuracy in detail. The text in our explanatory popups and help pages repeatedly says “A Zestimate is not an appraisal …” etc.
These claims are unfounded and unmotivated. It is disapointing that the NCRC did not approach Zillow with its concerns. We’ve contacted the NCRC and have requested to meet with the to understand their concerns.
Thanks for writing.
October 30th, 2006 17:40
[…] 30th, 2006 This morning I reported that complaints were filed to the FTC by the NCRC against Zillow for “misleading consumers” with their homeestimates. […]