Popular Real Estate Site Accused of Knowingly Misleading Public

Ever check out the satellite photos and market value estimates of homes in a particular neighborhood on Zillow.com?

The Internet site that offers “free, instant valuations and data for 67 million homes” was launched with major media fanfare last February, backed with a reported $57 million in venture capital. It is one of the most popular real estate sites online, visited millions of times every month by many a seller, buyer, agent, mortgage lender and homeowner.

But Zillow is now under harsh scrutiny, syndicated columnist Kenneth Harney writes. In a complaint filed October 25 with the Federal Trade Commission, the National Community Reinvestment Coalition (NCRC) charged that Zillow knowingly deceives the public by presenting property estimates as accurate, when they are frequently way off the mark.

The non-profit coalition, composed of housing and economic justice organizations around the country, says its own audit of Zillow’s accuracy documented that its valuations are within 10 percent of actual market value less than a third of the time.

The allegedly erroneous estimates can be especially harmful to people seeking mortgage loans and property in low- and moderate-income and minority neighborhoods, according to the complaint.

“While overvaluations were prevalent in predominantly white areas, undervaluations were more frequent in communities that were predominantly African-American or Latino by census tract,” the complaint charged.

That alleged disparity, in turn, has opened the door to a variety of deceptive and predatory lending practices in those neighborhoods.

In a statement, Zillow denied the allegation, calling the complaint groundless:

“As we say consistently and prominently on our Web site, Zillow is a free research tool for consumers, and Zestimates are designed to be a starting point for consumers who want to learn about the value of houses. We make every effort to explain on our site the role of Zestimates as a research tool, as well as to clearly display our rates of accuracy for every area we cover.”

San Diego property appraiser Vicky Cassens Zillioux says that “valuing a property for a financial decision is not a game — and should not be treated lightly by the consumer, lender or the vendor supplying that value.”

She notes that appraisers are held to high standards of accuracy and legal liability by lenders and regulators, and “a similar level of accuracy should be expected by the consumer at Zillow.com.”