Zillow’s Zestimate, which uses an algorithm to estimate the value of a home, has faced recent legal controversy. The owners of Castlebldrs.com have filed a class action lawsuit against the Seattle based company claiming that the Zestimate has grossly influenced the expectations and amount customers are willing to offer for a home. CastleBldrs co-owner Vip Patel states, "Buyers tell us Zillow says a certain number for this house, and that's the number they're willing to pay." The issue he finds with this is that the Zestimate is often much lower (according to Patel, at least 20 percent lower) than the home’s market value, but buyers are unwilling to pay more than the “Zestimated” price.
In response, Zillow has reiterated that the Zestimate portion of Zillow.com is not an appraisal. Zillow spokeswoman Emily Heffner elaborates that the tool is “a starting point that people can use when they're working with a professional appraiser or a professional agent to determine the home's value." The case is more or less based on the legality of a company issuing unofficial appraisals of homes. The Patels’ are arguing that the Zestimate is posted without the homeowner’s consent and that the company is violating the Illinois state law that forbids anyone from preparing an appraisal without a state-issued license. Zillow highlights that this law “does not apply to the procurement of an automated valuation model," which is the system behind the Zestimate.
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