On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate acquisitions & dispositions on Thursday, June 14, 2018.

A class-action lawsuit against Zillow was tossed out of federal court for the second time. The plaintiffs had alleged that Zillow’s home-valuation tool was misleading and the company’s practices were intentionally deceptive.

According to the complaint, which was filed by a group of property sellers near Chicago, Zillow has hidden relationships with realtors that put private owners who try to sell their properties on their own at a serious disadvantage. The online valuation tool provided by Zillow was the first to give property buyers and sellers access to the type of value comparisons that had traditionally been available only to realtors.

Since so many people look at Zillow when shopping for a property, an incorrect value on the site can damage the chance of a sale before it even gets started. Owners claim the company ignores challenges to inaccurate estimates and purposefully lowers the value on properties not listed with the company’s affiliated agents. They say the company has a financial incentive — 71 percent of its revenues — to manipulate the figures because the affiliated brokers pay for ads and leads on the site.

For its part, Zillow maintains that its estimates use millions of pieces of public data that are put through its private algorithms to produce an approximate value. It also claims that its values are fairly accurate — and that users are warned from the start that the figures they see are merely estimates.

The judge in the case stated that Zillow’s warning to consumers is sufficient. Its arrangements with realtors who pay for advertising on the site doesn’t create a conflict of interest.

Buyers who are looking for property — whether they plan to change residences or want to invest in rental property — should keep Zillow’s warnings in mind when they use the tool. Instead of relying on an estimate provided by the site, use it as just one piece of information as you seek to determine the true value of a property.

Source: The Real Deal, “What to make of the dismissed class-action lawsuit over Zestimates,” Kenneth Harney, May 27, 2018

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