U.S. District Court Judge Amy St. Eve dismissed the class-action lawsuit filed in May against Zillow. The lawsuit alleged Zillow’s Zestimate tool misled potential homebuyers into believing the Zestimates were actual, accurate appraisals.
Judge Amy St. Eve stated, Zillow’s Zestimates “are not likely to confuse potential homebuyers as they are simply a ‘starting point’ for home buying research.”
In June, our own Connor Wrenn, covered the contest Zillow held to fix Zestimates’ algorithm. This makes you wonder just how Zillow escaped the lawsuit, considering the suit alleged that Zestimates injured home sellers and builders because it listed properties with lower values than the asking price (hinting the algorithm was faulty and shortly thereafter, Zillow is holding a contest to fix said algorithm).
Judge St. Eve hints the reason is because Zillow states on their website that Zestimates are not necessarily accurate – which seems like quite the understatement.
Zillow has previously stated their algorithm “isn’t perfect.” Zestimates are within 5% of the actual sale price approximately 54% of the time; within 10% of the actual sale price approximately 76% of the time; and within 20% of the actual sale price approximately 90% of the time according to the lawsuit.
What about the rest of the claims?
What about the part that states Zillow’s practice is listing home values based on Zestimates’ algorithm was fraudulent since the company isn’t a licensed appraiser.
Under Illinois state law, it’s indeed illegal to offer an appraisal without a state license to do so.
However, Zillow was prepared for this allegation and stated that there is a section of the same law that allows “automated variations.” Judge St. Eve obviously agreed as she wrote, “the word ‘Zestimate’ – an obvious portmanteau of ‘Zillow’ and ‘estimate’ – itself indicates that Zestimates are merely an estimate of the market value of a property.”
On the brightside
On a positive note, however, the judge stated the plaintiffs would be allowed to re-plead three of the four claims:
- The claim that Zillow violated homeowners’ privacy by placing their homes on its site without their permission.
- Plaintiffs seek an injunction for costs and attorney fees under Illinois Uniform Deceptive Trade Practices Act (IDTPA).
- Plaintiffs seek damages, costs, punitive damages, and attorney fees based on the violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA).
Questions, comments, concerns
What do you think about the ruling? Do you agree with judge St. Eve, or do you think what Zillow is doing is unfair?