Zillow.com Told to Stop Issuing Home Value Estimates in Arizona
April 18th, 2007 categories: Central Connecticut News & Information, Home Buyers
The state of Arizona recently told Zillow.com to stop providing Zestimates, their version of property value estimates. The issue is that Arizona feels Zillow is providing appraisals and they do not have a license to do so. Zillow argues that their Zestimates are not appraisals and the public does not think Zillow.com is providing free appraisals.
You decide.
Are Zillow.com Zestimates appraisals?
The definition of an appraisal:
“An estimate of quantity, quality or value; the process of through which conclusions of property value are obtained; also refers to the report setting forth the process of estimating value.” From my “Fundamentals of Real Estate Appraisal” textbook.
From Zillow.com, their definition of a Zestimate:
The Zestimate™ (pronounced ZEST-ti-met, rhymes with estimate) home valuation is Zillow’s estimated market value, computed using a proprietary formula.
Although Zillow.com says Zestimates are not an appraisal, don’t these two definitions sound sort of similar?? Both use the words “estimate” and “value.”
Does the general public know the difference between an appraisal and a Zestimate?
There is a good discussion of this issue on BiggerPockets. You’ll see my response to the issue of the general public being aware of the difference but here it is anyway:
While real estate professionals understand that a Zestimate is not an appraisal, consumers do not. Not only have clients of mine referred to Zillow to make buying decisions but I just read with horror this past week in my local paper that a taxpayer was suggesting that towns cease hiring appraisers to do property valuations.
Furthermore, the writer suggested residents use Zillow’s Zestimates to fight their town’s property valuations. Obviously, she had not read the site to find that Zillow gets its information from the town and my paper is so clueless that they published it.
My point is that people are not reading the disclaimers, they do not understand how the figures are calculated and they are making important decisions based on this info.
Are Zestimates Illegal in CT?
In CT, you must have a license to issue appraisals and charge for them. According to the state statutes:
“Real estate appraiser” means a person engaged in the business of estimating the value of real property for a fee or other valuable consideration.”
No person shall act as a real estate appraiser…without the appropriate certification…unless exempted by the provisions of sections 20-500 to 20-528.
Exceptions would be:
…any person under contract with a municipality who performs a revaluation of real estate for assessment purposes…any licensed real estate broker or real estate person who estimates the value of real estate as part of a market analysis…
I don’t know if the Zestimates are illegal in CT or elsewhere. But I do know that Zillow.com has an issue with Zestimates at least being perceived as such.
Well this is a fine how do you do isn’t it. Zillow has never claimed to be an appraisal and is steadfastly claiming it is nothing but an Automated Valuation Model (AVM) as defined at http://commerce.appraisalfoundation.org/html/2006%20USPAP/ao18.htm
Also Zillow isn’t charging for it’s zestimates so their seems to be a gap between a free AVM and a paid appraisal.
If there is a public disconnect between thinking a free AVM is a paid appraisal, isn’t that a statement on how shockingly poor appraisers public relations and education is. In fact considering AZ appraisers are acting like ZIllow is an actual threat to their jobs, it likely only underscores the idea in the publics mind that Zillow is in fact an accurate appraisal.
If Zillow has to stop providing zestimates, then so should ALL online AVM providers. Which is currently every major brokerage in some form or another.
Maybe I need to read more widely, but I’m not hearing much of a defense from appraisers to the value they bring to a transaction.
You’re right - I haven’t heard too many appraisers talking about Zillow. I think because they are typically hired by the bank, they don’t have to justify themselves to the general public.
Zillow “Guess-Idiots” appear to rely on public tax records that in some cases haven’t been updated in twenty-five years. The zestimator is a sketchy tool to rely on. I believe it’s best to use a Professional Realtor when appraising property.