By: Ben Luke | May/June 2018
Zillow has been in the news a lot lately:
First with a lawsuit over Zestimates
A lawsuit was filed in May 2017 by a homeowner over the “Zestimate” tool that calculates a house’s worth. The FSBO homeowners complained that Zillow was under-valuing the property keeping the property from being sold. You may have experienced FSBO’s and non-represented Buyer’s going back and forth as the “value” changes several times a week or even a day. The issue is that the public perception is that the “Zestimates” are equivalent to appraisals. The plaintiffs argue that under Illinois state law the market-value estimates offered by Zillow fit the definition of appraisals and therefore there is a licensing issue, and that Zillow should obtain the consent of the homeowner before posting any information online. The attorney filing the case is looking to have the suit qualified as a class-action law suit against Zillow.
See the article on the Illinois Case here »
However in August 2017 Zillow won the suit in Illinois
U.S. District Judge Amy St. Eve, however, said Zestimates are a mere “starting point” that are unlikely to confuse homebuyers, pointing to disclaimers by the Seattle-based company that they may be inaccurate and are not official appraisals. “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,” the judge wrote. St. Eve said the plaintiffs may try to replead three claims, including for Zillow’s alleged invasion of privacy for posting their homes on its website without permission. Barbara Andersen, a lawyer for the plaintiffs, said her clients are looking into amending the complaint, which she called the first proposed class action of its kind.
See the article on this ruling here »
There is also a similar suit against Zillow filed in New Jersey filed in January 2018.
This suit alleges Zillow is knowingly posting inaccurate and misleading information.
See the article on the New Jersey case here »
Then, Zillow was charged with a RESPA violation by the CFPB
This was probably before the changing of the guard at CFPB, regarding advertising cost sharing with real estate agents. CFPB was considering whether this setup violated the anti-kickback provision of RESPA and the section of the Consumer Financial Protection Act that prohibits anyone from helping financial service providers deceive customers. Zillow also faces an ongoing shareholder lawsuit over this situation. A shareholder filed a lawsuit in August 2017 alleging that Zillow defrauded investors by misrepresenting its co-marketing program’s compliance with regulations, artificially inflating its stock price. A month later, another investor filed a similar lawsuit. A federal court consolidated the cases in January. However Zillow has recently been found not guilty under a RESPA violation regarding advertising with real estate agents.
See the Inman article recently posted by ALTA here »
As a service provider CFPB had charged Zillow with a violation of RESPA… the big take-away here is advertising costs must be paid in proportion to the portion of advertising done by the participating parties. A real estate agent, lender, or title agent are not free to pay all or most of the advertising costs.