A lawsuit in the US is stirring interest in the UK – with questions being asked as to whether something similar could happen here.
The States litigation concerns a home owner who says that a large chunk of money was knocked off the value of her home by an automated ‘algorithm’ tool on the property portal Zillow.
Barbara Andersen is trying to sell her home for $626,000, but Zillow’s Zestimate values it at $544,806.
Andersen says the Zillow valuation is wrong, as it based on cheaper houses in Illinois, and is damaging the prospects of her own sale.
Andersen, a lawyer, is not looking for cash or compensation, but for the estimate to be amended.
The lawsuit also challenges the legal status of ‘appraisals’.
Zillow argues that its Zestimates are not appraisals, but Anderson claims that as they “are promoted as a tool for potential buyers to use in assessing [the] market value of a given property,” they meet the definition of an appraisal under State law.
She says that in the US – where realtors must be licensed – this means that Zillow should also be licensed to perform appraisals before offering such estimates, but should also obtain the consent of the home owner before posting them online for everyone to see.
Zillow has said that the litigation is “without merit”. It has been offering Zestimates since 2006. The tool offers “estimated market values” on homes whether they are for sale or not.
Agents and home owners are critical of Zestimates, according to the Washington Post. It says that the estimates are sometimes 30% adrift in either direction.
There is ample evidence of ‘experts’ using these online, algorithm-driven, figures to ‘value’ properties and, of owners/ buyers relying on these figures as factual (despite some disclaimers). Many of these figures are wildly out of kilter with eventual sale prices.
Statements on some agents sites inviting owners to find out how much is your home “worth” or the “value” of your home, also invite potential legal action. I believe it is a matter of when there will be a legal challenge in the UK not if.
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Never mind the owners and buyers relying on them Chris, its the surveyours that worry me.
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In the States surveyor valuers have away from public AVMs where surveyors can up or downgrade prices based on their knowledge and local experience.
In the UK AVMs should be kept away from Joe Public and used just by subscribing agents and valuers.
If such web tools mislead and cause under valuation offers. Ultimately the content provider should be held accountable.
Equally, if an estimate is too over the top and a seller subscribes to the agent inaybe a sole selling agreement.
Trading Standards or a court could say the wide bandwidth of the valuation might come under ‘BAIT AND SWITCH’ one of the 31 Trading Standards banned practices.
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Lost count of the number of buyers who used Z’s valuation tool to put forward stupid offers. I have also had some interesting arguments with RICS surveyors for mortgages using the data when there has been no recent history of sales in a particular area. At the other end, valuation tools sometimes tell vendors the property is worth a lot more, causing difficulties with winning an instruction. Of course they use a disclaimer to get out of jail which relates to information is not accurate and cannot be relied upon, so why provide it? Many a company has fallen foul of disclaimers being invalid, it is not a defence to providing misleading information.
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Unseen this BIG data farce affects many many small businesses. The same data that feeds the random number ‘GASP’ * systems powers lenders’ algorithms.
Take a trip you your business bank, make a casual enquiry about borrowing and see what comes up. “Compooter sezzz no!” ” you don’t have enough equity in your property?”
Designed by people with no understanding of supply/demand valuation the algorithm systems have exactly the compound errors I predicted when they were introduced.
The cloud does has a silver lining; at some point someone will catch wind of the increasing error and the advice offered by hapless listers. Those who take the numbers as gospel when confirming what the vendor has looked up and believed off the internet. With an agents duty of care and skill supported by case law there is a wonderful opportunity for the ambulance chasers once the PPI claims are done with.
The current average undersell is currently over £9500. Those who don’t have their (redress scheme required) evidence to support any valuation on a rolling 72month period could have a serious and embarrassing problem. ” I looked up the numbers on the internet” isn’t likely to pass for due care and skill. At the very least that means forfeiting any commission paid as well as being liable for any loss incurred by the principal.
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“The current average undersell is currently over £9500.”
Average as in mean? Median? Mode? Based on what data? A full survey or not?
Properties that have actually sold? How can you value a property that hasn’t sold. How can you be 100% that a property has undersold.
Using what agents, in what areas?
Having a pop at other people for their use of data and then just throwing that out there with no care or attention.
If it is just the ZPG “valuation” then that isn’t undersell and again can’t be proved until the sale goes through.
Or is it the ZPG valuation vs Land Reg listed sale price?
1 £10,000,000 sale could offset 100 £180,000 properties.
I just don’t think you can make a statement like that without rigorously explaining the methodology, sample size and the assumptions.
Especially when you criticise online agents for that same mistake!
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Looks like we’ve had a subsitution –
Off limped cyberduck
On came observer
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No response to the actual point in question…
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I was talking to a leading judge last week who is not exactly stupid and during the conversation he said that he had just used the Zoopla tool to value his house and it was far less than he had expected. When I explained that the tool simply took his postcode and averaged out the dozen or houses in his postcode he was very surprised and felt that he had been misled. (He’s now having his home valued by a reputable high street agent!).
Let’s hope there’s a court case here sooner rather than later.
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“When I explained that the tool simply took his postcode and averaged out the dozen or houses in his postcode he was very surprised”
No more surprised that I am with that explanation, Mr Copus! Certainly not done that way on any figure I’ve ever seen.
In my experience the information it relies on is purely previous sale data. And if that data is flawed (and I have examples, as I am sure most others would also be able to produce) then it has a domino effect on the ‘Estimate’ figure.
I have also found the ‘Zoopla Estimate’ to be the easiest figure on the planet to manipulate. Try it for yourself – you may be surprised by the outcome. Below the ‘Estimate’ is a hyperlink inviting “Refine estimate”.
I managed to increase a property value by 5.56% with just two emails and a borrowed set of ‘nads.
Most interestingly, though – hover over the ‘Estimate’ and you get the following pop-up:
“The Zoopla Estimate is our assessment of the current market value of a property.”
That’s quite a compelling statement, I would suggest.
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I want my nads back
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They’re in the post, wardy…
First class, of course…
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If I were ZPGs’ legal team I’d be having a cold sweat looking at that! Did you screenshot it?
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OHHHHHHH YESSSSSSSSSS!
http://tinypic.com/r/2cxzrkj/9
;o)
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How accurate is a Zoopla estimate?
Its accuracy depends on location and availability of data in an area. The more data available, the more accurate it is.
source: http://www.zoopla.co.uk/home-values/
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Garret2
“Its accuracy depends on location and availability of data in an area. The more data available, the more accurate it is.”
You’ve got to dig quite deep to find that disclaimer – for what it’s worth.
How is anyone supposed to know the degree of accuracy?
A ridiculous statement like that would get most of us done up like a kipper if we were dumb enough to rely on it.
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“How is anyone supposed to know the degree of accuracy?”
….Easy!
They’re cool like that, they tell you…
Exhibit A: https://ibb.co/j3BcmQ
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So… clear as mud, then.
And certainly as much use as ***** on a bullock – but of course we all knew that already…
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