Earlier this month a federal judge in Chicago dismissed a class action lawsuit against the online real estate company, Zillow. Zillow was accused by Illinois homeowners of violating the Illinois Deceptive Trade Practices Act and the Illinois Consumer Fraud Act in its promotion and use of the website’s “Zestimate” tool which posted millions of estimates for homes across the state without homeowners’ permission. Additionally, Zillow allegedly failed to notify potential buyers that the “Zestimates” were not based on legitimate market values, or that the website was generating revenue by promoting certain agents and lenders.
The alleged marketing scheme functioned through Zillow’s posting of inaccurate estimates for Illinois homes, which pressured potential buyers into using a broker on the site to get a proper estimate. Zillow in turn would generate significant profit off the brokers’ advertisements.
A U.S. District Judge, however, was not convinced, and dismissed the case after finding the fraud claims to be unjustified. According to the federal judge, potential buyers are unable to claim deception since the website discloses that its figures are merely estimates and may not be accurate. The decision states that the website was in no way attempting to mislead its visitors since they were made abundantly aware of potential inaccuracies and that the consumer’s permission was requested prior to getting an agent’s estimate on their home.
While certainly a major victory for Zillow, the real estate website still faces pressure from a potential enforcement action by the Consumer Financial Protection Bureau under the U.S. Real Estate Settlement Procedures Act which bars companies from receiving value in return for promoting real estate brokers.