Most prospective home buyers begin their search on the internet, probably landing on Zillow.com at some point. That website gives possible values—called “Zestimates”—for nearly all houses in the country. Problems can arise if a property’s listing price and the corresponding Zestimate differ by a lot. Can a seller sue Zillow in that situation? A federal court in Illinois recently said “no,” but that might not be the end of the story.
In the case, Patel v. Zillow, Inc., several homeowners accused the company of publishing lowball Zestimates about their properties. That scenario allegedly drove away potential buyers and led to sellers being harassed with improper valuations. The homeowners sued Zillow, claiming that the website had violated Illinois laws governing real estate appraisers and consumer protection. But the court dismissed all of the causes of action. It found that Illinois law does not allow consumers to sue for purported violations of the state appraisal law. Also, according to the court, Zillow’s actions were not deceptive, fraudulent, or unfair under the state’s consumer statutes.
Does this mean Zillow is in the clear and can publish Zestimates with abandon? Not necessarily. The Patel decision is limited to Illinois law, and there is no guarantee that other states’ law will lead to the same result. Also, the plaintiffs in Patel (foolishly, in my opinion) allowed the case to be removed to federal court without objection. Since the case involves only Illinois consumers, the plaintiffs might have been able to block removal. Compared to their federal counterparts, state courts are much less willing to dismiss class actions. So Patel might have been more successful by trying to stay in Illinois court. Finally, the fact that Zillow earns money from brokers and agents who advertise on pages that display Zestimates might be the company’s Achilles Heel. Clever lawyers will likely continue to test ways in which that relationship triggers viable causes of action for prospective sellers.