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Nonprofit alleges Zillow estimates are inaccurate

In FTC complaint, group claims site's real-estate valuations are misleading consumers.

A nonprofit has filed a complaint with the FTC against, the real-estate estimate Web site, accusing it of posting inaccurate estimates.

In its complaint with the Federal Trade Commission, the National Community Reinvestment Coalition states that Zillow is "intentionally misleading consumers and real-estate professionals to rely upon the accuracy of its valuation services despite the full knowledge of the company officials that their valuation Automated Valuation Model (AVM) mechanism is highly inaccurate and misleading."

"We believe these allegations are groundless," said Zillow in a statement. "Zillow is a free research tool for consumers, and Zestimates are designed to be a starting point for consumers who want to learn about the value of homes. We make every effort to explain on our site the role of Zestimates as a research tool, as well as to clearly display our rates of accuracy for every area we cover."

The NCRC, however, said in its complaint Thursday (click for PDF) that despite Zillow's disclaimer that its site is a starting point, thousands of people use the site for mortgage and real-estate transaction information. It contends that because of this, inaccurate estimates from Zillow put lending and credit institutions in a position to defraud people of the true value of their home.

"For a company that represents to consumers that they are the 'Kelley Blue Book of Homes,' this is a very dangerous situation...NCRC and its members are aware of a growing number of real-estate and lending professionals who use the misinformation on to perpetrate fraud in our nation's markets, often by targeting consumers in violation of Federal and State Fair Housing Laws," said John Taylor, NCRC president and CEO, in a statement.

According to Zillow, its accuracy rate has a 7.2 percent median margin of error when compared with actual sales prices; the Seattle-based company states that fact in several places on its site.

"That's pretty good, considering we've never been inside the home, and don't know about a kitchen remodel," said a Zillow representative.

Zillow announced on Thursday that it would open up its application programming interface, or API, and allow consumer Web sites to use its "Zestimates" free of charge. By implementing Zillow's API, real-estate agents could create mashups with Zillow estimates on their own Web sites. In July, Zillow signed a deal with Yahoo, making it the supplier of estimates for Yahoo Real Estate.