I’ve written before about how there’s no down-side to appealing your property taxes annually — if your appeal is won, your tax value is lowered. If its found to be correct or low, there’s no penalty. Homeowners are advised to do this annually, particularly in a re-assessment year.
Well, now news has come to light that Cook County used Zillow’s Zestimate tool in official assessments for property taxes. 🤦♀️
Why is this a total mess? Because the Zestimate is NOT an accurate tool to wager one of your biggest assets on. Would you be willing to take a 20% gamble on your real estate investment?
No one really knows how the Zestimate algorithm computes. But from Zillow’s website, let’s look at what they say regarding the Zestimate and then look at two recent events.
source: Zillow, with emphasis added
The Chicago Agent article referenced above does a great job outlining why this unprecedented approach to tax assessments can result in inaccuracies and bias. But take into consideration these other two recent events…
Zillow CEO sells home for 40% less than Zestimate
As reported in GeekWire in May (spring market) 2016:
Spencer Rascoff, CEO of the Seattle-based real estate media website, sold a home in the city’s Madison Park neighborhood for $1.05 million at the end of February. On March 1, the day after the sale, the Zestimate for the home reached $1.75 million. On Zillow’s website [in May], it’d come down to $1.575 million.
The company’s data coverage and accuracy web page indicates that there are 102.7 million homes with Zestimates on Zillow. Nationally, the Zestimate has a median error rate of 7.9 percent, which means half of the Zestimates in an area are closer than the error percentage and half are farther off. In Seattle, the median error is 6.1 percent.
The Rascoff property, which the CEO was not living in at the time, falls into a category of about 20 percent of sales in which the Zestimate misses the sale price by more than 20 percent.
Illinois: Zillow sued over Zestimate home valuation tool
As reported in the Chicago Tribune:
The suit, filed  by Chicago-area home sellers, alleged that Zillow systematically engages in a confusing, unfair and deceptive marketing scheme that impairs homeowners and sellers in the sale of their houses. Plaintiffs charged that Zillow hides its multiple financial arrangements with realty agents and lenders, and that it ignores or refuses to correct “Zestimates that homeowners challenge as inaccurate or unfounded.”
Plaintiffs also alleged that the company lowballs value estimates on so-called FSBOs — for sale by owner homes — on its website, then increases them if a realty agent who pays money to Zillow subsequently lists them. An earlier version of the suit alleged that Zestimates undervalued plaintiffs’ homes and violated Illinois appraisal rules by serving as the functional equivalent of appraisals. That suit was dismissed, but the court allowed the plaintiffs to file an amended version.
That lawsuit was ultimately dismissed on the grounds that Zillow advises homeowners speak with a real estate professional (realtor, appraiser) to determine their homes values — that the Zestimate is merely a data point, and one prone to error as disclaimed.
Bottom line: Homeowners should be appealing their property taxes annually. Condo owners can do this together as one association. If you’d like to speak with a real estate attorney for more information, reach out and I’m happy to refer you to members of my team.