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Should you really care that Zillow’s CEO overpaid for his own home according to Zestimate?

(BUSINESS NEWS) Zillow’s CEO overpaid significantly for his new home, proving the Zestimate tool may not be all it’s cracked up to be. Should you care?

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In April of this year, Zillow CEO, Spencer Rascoff, purchased one of the most expensive homes in California. Rascoff purchased a large six-bedroom mansion in Brentwood.

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The home had recently been remodeled and was situated on a half-acre lot with a full complement of amenities. As nice as it sounds though, it does come with a good dose of irony as the cherry on top.

An uneducated Zestimate

According to Zillow’s own pricing tool, Zestimate, Rascoff overpaid for his California mansion by more than one million dollars. If that wasn’t enough to make you question the validity of the Zestimate tool, The Real Deal adds more fuel to the fire, reporting, when Rascoff sold his home in Seattle, it sold for $650,000 less than the nearly $1.7 million Zestimate.

In all fairness, however, he did make quite a profit, considering he originally paid $768,500 for the Seattle home.

Sadly, it’s happened before

This isn’t the first time the “Zestimate” tool and other similar tools, have been under fire. When you Google “Zillow” along with “entertainment purposes” you’re met with a bevy of results regarding the tool’s inaccuracy. Unfortunately, this is not the first time an aggregator founder has been called out.

Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto, listed his 2,000 square foot New York condominium on FSBO and other online classified sites, but after six months of no luck, he opted to hire a real estate broker.

Once he decided to stop DIY-ing it, his home sold for more than the asking price.

To read more about Sambrotto’s ordeal, we covered it here. Proving that sometimes, DIY-ing it is harder than it seems.

Realtors ring in a win

More than anything else, what this proves is that these estimating tools have flaws. They are not carved-in-stone, 100% accurate. They are meant to be a ballpark figure to determine a starting place and in some cases, they aren’t even in the ballpark.

This again validates the need for Realtors to navigate pricing, listing, and all the other issues that can arise. There is nothing wrong with DIY-ing it, but when it comes to real estate, consumers could wind up losing a significant portion of their investment if it’s just ballparked.

This is why Realtors loved the story.

So should you give two hoots that Rascoff overpaid for his house? Nope, it’s just a salacious story that was spread around by those who hate Zillow, and defended by those who love it. We doubt anyone was converted to the other side by this news.

But it will be a perpetual talking point for those seeking to promote the Realtor brand. Brokers will cite it in marketing, agents will cite it on listing appointments, practitioners will note it at networking events for years.

#UnedcuatedZestimate

Senior Staff Writer at The Real Daily, Jennifer Walpole holds a Master of English from the University of Oklahoma. She has long been a dedicated business and technology writer, and she holds real estate close to her heart, as she comes from a family of brokers.

Real Estate Corporate

Zillow gets one step closer to practicing real estate

(CORPORATE) Real estate giant, Zillow, has been testing “Instant Offers,” today expanding to include themselves in the mix of buying and selling homes.

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For over a decade, real estate practitioners have worried that their feeding Zillow endless information would empower them to eventually pick up real estate licenses and become their largest competitor. In 2007 and 2008, it was massive blog fodder an an emotional issue for many as agents and brokers rallied against it.

Zillow has always said they will never practice real estate. Ever. They’ve maintained their position that they sell ads, not properties.

But today, the company is one step closer, as SEC filings reveal they will be testing the buying and selling of homes directly in two test markets, Phoenix and Las Vegas.

They’re not the brokers of any of the deals, and this is clearly a play to compete with Opendoor which is already valued at over $1 billion, but it is certainly another inch closer to confirming the fears that caused so many to figuratively flood the internet streets with torches and pitchforks.

The company announced today that they would be expanding their Zillow Instant Offers Program to Phoenix after testing in Vegas and Orlando last year, wherein sellers could solicit cash offers from investors.

In the new test markets, however, they’ll be participants, stating they will be “buying and selling homes with Premier Agent partners.”

Zillow stated that their Instant Offers Program is “an excellent source of seller leads for Premier Agents and brokerage partners,” given that the majority of sellers who requested an offer ended up using an agent from the program.

Fast forward to today, and they’re no longer the matchmakers, they’re also planning to buy and sell investment properties themselves.

In a statement the brand said, “Beginning this spring, home sellers in the Phoenix and Las Vegas real estate markets will be able to compare an agent’s comparative market analysis (CMS) to offers from Zillow or other investors.” Adding, “When Zillow buys a home, it will make necessary repairs and updates and list the home as quickly as possible. A local agent will represent Zillow in the purchase and sale of each home, enabling agents to earn commissions.”

All of this could be one step closer to competing in the real estate market as actual practitioners, or maybe Zillow is just as enchanted with Chip & Joanna Gaines’ house flipping as the rest of us.

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Real Estate Corporate

Zillow challenges federal antitrust allegations

(CORPORATE NEWS) Zillow says they’ll “vigorously defend” themselves against allegations that Zestimates are concealed on partner brokers’ listings.

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Earlier this week, New Jersey broker, EJ MGT LLC filed a lawsuit accusing Zillow of concealing Zestimates on specific listings, implying that paying partners are given an unfair advantage in the marketplace. The suit acknowledges that Zestimates appear somewhere on all listing pages, but alleges that only certain brokerage listings do not have the Zestimate listed prominently under the listing price.

Court documents offer screenshots of listing pages with and without Zestimates as well as documentation of communication with Zillow Group staff explaining that only “certain brokers” receive “certain treatment.”

But not so fast.

Zillow points out that Zestimates simply appear on different parts of the page for different listings.

Emily Heffter, Sr. Manager of Public Relations at Zillow Group tells The Real Daily, “despite the claim in the suit, no listings on Zillow are exempt from having a Zestimate. Some listings have the Zestimate in a different place on the page.”

The lawsuit criticizes the accuracy of Zestimates, a critique the company is quite used to and typically responds by reminding people that they are not appraisals, and not always accurate across the board (some states are non-disclosure states, for example, so home sales data flows differently depending on location).

Heffter reaffirms just that, noting that “the Zestimate is not an appraisal. It’s an estimate created by a sophisticated machine-learning process, and it’s meant to be used as a starting point in determining a home’s value. Zillow is very transparent about its accuracy, and we [sic] our median error rate is about 4.5 percent.”

Typically, in times of active litigation, Zillow and other companies refrain from commenting. Not this time.

Zillow Group’s official statement: “We believe the claims in this case are without merit. The Zestimate is intended to be a starting point for determining a home’s value, which is why we provide it, for free, on more than 100 million homes across the country. As a company, we always seek to create advertising products that add value for consumers and advertisers, and we intend to vigorously defend ourselves against this lawsuit.”

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Real Estate Corporate

Zillow sued for Zestimates violating federal Antitrust laws

(CORPORATE NEWS) Zillow being sued for Zestimates is nothing new, but they’re now being accused of concealing Zestimates on “Co-Conspirator Broker” listings, violating federal Antitrust laws.

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The latest Zillow legal troubles again surround their Zestimates; this time they are being sued for their Zestimates violating federal Antitrust laws. The company has allegedly violated and continues to violate Section 1 of the Sherman Act, 15 U.S.C. § 1 and the New Jersey Antitrust Act, N.J.S.A. 56:9-3.

Plaintiff, EJ MGT LLC, based in New Jersey, filed suit against Zillow Group Inc. and Zillow Inc. today. In a 21-point legal brief outlining their specific violations, two things become immediately clear (assuming of course there is truth in these allegations): Zillow is giving preferential treatment to preferred brokerages (labeled ‘co-conspirator Broker[s] in the lawsuit) and Zestimates are wildly inaccurate (as many have adamantly stated since Zestimates’ conception).

The first few points of the brief explain exactly what Zillow is being accused of doing: “this antitrust action arises from Zillow’s conspiracy with certain real-estate brokerage companies to selectively conceal ‘Zestimates.’ ”Zillow’s estimate of a residential property’s “fair market value” which the lawsuit states they know “to be inaccurate,” have allowed “only select brokers to conceal the display of Zestimates on their listings to the exclusion of the general public.”

The lawsuit goes on to state that “these agreements between Zillow and certain co-conspirator brokers of residential real estate restrain trade (read: the agents/brokers being allowed to conceal unwanted Zestimates, henceforth referred to as ‘Co-conspirator Brokers’) and deprive Plaintiff and the public in general of the benefits of open and robust competition in two markets: the residential real estate market and the residential real estate brokerage market.”

In essence, Zillow and the Co-conspirator Brokers have allegedly made an illegal agreement regarding the display of Zestimates on Zillow’s site.

Zillow has long touted their Zestimates as a “user-friendly format to promote transparent real-estate markets and allow people to make informed decisions;” except Zestimates are often believed to be inaccurate and now they’re allegedly being concealed for a select group of Co-conspirator Brokers – a far cry from making real estate more transparent.

If the lawsuit’s claims have any validity behind them, it seems as though Zillow may be in for a bumpy ride. Item 10 in the suit states, “Zillow has acknowledged that it conceals Zestimates as a result of agreements with only ‘certain brokers’ who receive ‘certain treatment’” and uses a message screenshot from Zillow’s Help Center as proof these words were in fact used to explain why some listings had prominent Zestimates while others did not:

You may be wondering what brought about this lawsuit; Plaintiff, EJ MGT LLC, is marketing a property located in Cresskill, New Jersey, through an agent unaffiliated with Zillow (not a “Co-Conspirator Broker”). Therefore, their listing contains a prominently displayed Zestimate, while a similar listing in nearby Alpine, New Jersey, which is listed through a “Co-conspirator Broker,” conceals the Zestimate:

The above example is not the only one outlined in the case, however. Item 12 of the lawsuit states that further evidence can be seen by comparing a residence page for a property while it was listed with a Co-conspirator Broker versus the same residence page once the property was off the market. One clearly conceals the Zestimate, while the latter displays it clearly underneath the listing price.

For reference, the Co-conspirator Broker listing was captured on December 26, 2017 and the screenshot after it was taken off the market with the Zestimate was taken on January 2, 2018. Merely a week in between images, and yet the difference of how the ad is displayed is quite apparent:

In essence, Zillow has violated the very transparency they claimed to create.

Zillow is allegedly promoting misleading and inaccurate information while using their marketing power to charge brokers to hide this information which could negatively impact a sale, and which Zillow itself has acknowledged is sometimes inaccurate.

Also, general members of the public have no way to prevent Zillow from obtaining and posting information in this way, and it cannot be altered without hiring an alleged Co-conspirator Broker, as Zillow has explicitly refused to offer the option to hide information to individual homeowners, further deepening the dependency on Co-conspirator Brokers.

Because of their alleged refusal to treat everyone equally and “empower homebuyers with information,” they have potentially restrained trade in connection with the exchange of information regarding home valuation, and offered anti-competitive benefits to only those brokers chosen to purchase that ‘special’ service package from Zillow that removes Zestimates from listings.

Therefore, brokers are not on even footing: when a seller attempts to price check; the brokers without it could be losing out to those who have the ‘special’ package and removal of Zestimates alongside listing prices.

So far, each individual Co-conspirator Broker has not been named; they have been named as a group: Sotheby’s International Realty, Inc., Coldwell Banker Real Estate LLC, Century 21 Real Estate LLC, The Corcoran Group ERA, and Weichert Realty, according to court documents. It is unlikely that any action would ever impact the brokerages, rather Zillow Group itself.

Zillow is being sued for five counts: two counts of conspiracy to restrain trade, one count of violating the New Jersey Consumer Fraud Act, one count of slander of title/product disparagement, and one count of interference with prospective economic advantage. A jury trial has been requested.

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