Zillow.com, the fast growing (at least in popularity) real estate appraisal mash-up service based in Seattle, has hit an air pocket. The National Community Reinvestment Coalition (NCRC) is complaining that the “Internet financial services and real estate provider Zillow.com is misleading consumers, real estate professionals and financial service providers in on-line home valuations.” They have filed a complaint with the Federal Trade Commission which at this point is just a complaint, not an investigation. (Zillow president, Lloyd Frink gives his side of the story on the Zillow blog.)
The specific charges are:
- Zillow is falsely representing to the public that its on-line valuations are within ten percent of the home
- Zillow has a less than 30 % accuracy rate when offering the valuations for public consumption.
- Zillow.com’s over and under valuations are causing substantial injury to consumers nationwide when they consider selling their home, using their home equity or buying or refinancing property.
I think the crux of the problem is this point from the complaint.
NCRC further contends that the general public is unaware that AVMs are exempt from Uniform Standards of Professional Appraisal Practice (USPAP), and that the “average” consumer who relies upon information on the www.Zillow.com internet site mistakenly believes that he or she is receiving a valuation equivalent to one conducted by a valuation professional.
In other words, a lot of appraisal professionals can get dis intermediated by Zillow and their ilk, and that’s cause many a lot of sleepless nights. The classic old vs. new debate. On the other side of the debate, we are pretty sure the VCs who have pumped in $57 million into the company must be having an unpleasant weekend.
Frink makes a good point when he writes:
We say in many places on the site (and next to the Zestimate on every home details page) that Zillow is not an appraisal, but a free research tool for consumers. We’ve also tried to be really transparent since we launched about Zestimate accuracy.