Monday, April 16, 2007

Zillow Faces Potential Legal Issues in Arizona

Zillow, a great web 2.0 tool for real estate, has been sent a cease and desist in Arizona. I used Zillow as a way to get a feel for what my existing home was worth during the sales process and to understand the potential value of the home that I was purchasing. Zillow pulls its data from public records and aggregates them together into a really nice interface based on Google Maps.

A few more details:

The Arizona Board of Appraisal issued two cease-and-desist letters to the company that operates the popular real estate Web site Zillow, saying it needs an appraiser license to offer its "zestimates" in Arizona.

"It is the board's feeling that (Zillow) is providing an appraisal," Deborah Pearson, the board's executive director, said Friday.

Zillow warns users the estimates it provides are not a definitive value but a starting point for consumers. Launched in February, 2006, the company claims it has 4 million users a month, including people wanting to how much their homes - or their neighbors' homes - are worth.


Zillow issued a statement Saturday saying it disagreed with the board's view, and pointed to an opinion issued by a national appraisers standards group that said online estimates aren't formal appraisals.

"We strongly believe that providing Zestimates in Arizona is completely legal and in fact an important public service, given that Zestimates are the result of our 'automated valuation model' and are not a formal appraisal," co-founder and company President Lloyd Frink said in the statement. (Quotes from The Columbian)

I seriously doubt that this would hold up in court; however, a small web 2.0 start up might not be able to weather the cost and resource drain of a court battle. I hope that they are able to come to some resolution. It would be a shame to lose such a helpful tool.


Unknown said...

Thanks for the news. With $60M in venture capital and more to come, Zillow is likely to bring more financial resources to bear on a suit than the appraisers. However, they must win this fight: there are other states, notably PA, where appraisers are politically strong and working to protect their turf from a variety of new methods of assessing value.

Anonymous said...

Coming from the Automotive industry, where and fight to the death to be The Standard for pricing/values, I'm wary of letting one private organization (web 2.0 or no) determine a de facto standard for home value. Especially considering that homes are most American's single largest investment.

Zillow employees admit they have bugs in their Zestimates and, allegorically, I've seen it negatively impact a friend’s transaction.

Don’t get me wrong, I think much of the Real Estate industry is smoke and mirrors, but I don’t think Zillow is the answer.