Judge dismisses antitrust lawsuit against Zillow Group’s Zestimate home valuation tool

Zillow’s search home page. (Photo Via Screenshot)

A federal judge this week dismissed a two-year-old antitrust lawsuit against Zillow Group and its Zestimate home valuation tool.

In 2018, a New Jersey group called EJ MGT sued Zillow, alleging that a policy allowing some partners to move the Zestimate valuation tool lower down on listings hurts competition and amounts to a violation of U.S. antitrust laws.

The conflict arose when Zillow’s Zestimate for a home in New Jersey came in well below what EJ MGT wanted to sell it for. EJ MGT alleged that several buyers were dissuaded from purchasing the home due to the discrepancy.

Typically, the Zestimate is one of the most prominent aspects of a listing, appearing just below the list price. By allowing what EJ MGT called “co-conspirators” — brokers that partner with Zillow — to “conceal” Zestimates, Zillow undermined the transparency the tool was meant to create, the suit said.

In an opinion issued Tuesday, Judge John Michael Vasquez wrote that the prominence of a Zestimate on its listing or that of a competing broker didn’t hurt EJ MGT’s efforts to sell the house. From the ruling:

Rather, it appears from Plaintiffs allegations that its injury is instead casually connected to the discrepancy in value between the Property’s asking price and the Property’s Zestimate. Presumably, if the Zestimate for the Property was higher than Plaintiffs asking price, then Plaintiff would not be claiming any injury — which leads to the conclusion that it is the amount of the Zestimate, rather than its location, which causes Plaintiffs alleged injury.

Zillow issued the following statement on the decision:

“We are pleased the court dismissed the case and again found the claims in this lawsuit to be completely without merit. The Zestimate has proven itself to be a sought-after and valuable tool and is central to Zillow’s continued commitment to providing people with free and easy access to important real estate data.”

The judge dismissed the case without prejudice, which means EJ MGT can continue the legal dispute. The opinion says EJ MGT has 30 days to submit an amended complaint.

Over the years, the Zestimate tool has served as a source of contention from home sellers expecting to get more, home buyers expecting to pay less, and real estate professionals wishing they weren’t caught in the middle. Zillow CEO Rich Barton called the Zestimate “very provocative and personal and a little voyeuristic” in a 2016 GeekWire interview discussing how the company came up with the tool.

Zillow consistently refers to the Zestimate as just one data point that consumers have access to when considering buying or selling a home, along with information such as recent home sales and guidance from real estate professionals. Zillow explicitly points out that Zestimate does not constitute an appraisal. Launched in 2006, it marked the first time that homeowners gained access to estimated home values — data that was previously only available to real estate agents, appraisers and mortgage lenders.

Zillow says on its website that a Zestimate is exactly what it sounds like, an estimate. Zillow creates the estimates by pulling available data on the home and running it through a proprietary algorithm.

The estimates are only as good as the data available, and they’re getting better. Zillow says 78 percent of Zestimate values for homes in Seattle are within 5 percent of the eventual selling price. In early 2018, when the lawsuit was filed, only about half of Zestimates in Seattle were within 4.5 percent of the selling price.

Here’s the full opinion:

EJ MGT v. Zillow Group opinion by Nat Levy on Scribd

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