Seattle-Based Zillow Under Fire in New Jersey Federal Court

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Zillow Group, the Seattle-based online real estate database and creator of its proprietary “Zestimate” home valuation estimation algorithm, is being sued in the U.S. District Court for the District of New Jersey. Plaintiff EJ MGT LLC is alleging that the Zestimate is an inaccurate estimation tool, and that Zillow has violated antitrust laws by entering into partnerships or agreements with specific real estate brokers, allowing them to conceal or reposition Zestimate figures on listing pages. Essentially, the argument is that Zillow is manipulating the transparency that it endeavors to provide to real estate buyers and sellers in disseminating information to those involved in the real estate market.

Zillow disputes this account, and has said that while some partnerships may allow a broker to move the location of the Zestimate on the page, nearly every listing contains one, excepting those where not enough data is available to create a Zestimate in the first place. Zestimates are generated using an algorithm that takes into account a range of publicly available information, including other home pricing and sales data in comparable areas and neighborhoods. Further, Zillow has long maintained that Zestimates are precisely what the clever portmanteau denotes – an estimate that is not meant to be the end all be all of what is a reasonable price for a home, but rather a starting point for homeowners or homebuyers to evaluate for themselves along with other information.

The pending lawsuit alleges causes of action for conspiracy to restrain trade under the Sherman Act and under the New Jersey Antitrust Act, for violation of the New Jersey Consumer Fraud Act, for slander of title and product disparagement, and for interference with prospective economic advantage. This is not the first time Zillow has been sued based on the Zestimate – at least two past lawsuits have been dismissed where plaintiffs argued that Zillow represented Zestimates as appraisals without a license to do so. Nevertheless, the New Jersey lawsuit raises novel issues under federal antitrust law, the outcome of which may affect how brokers are able to operate in Seattle’s burgeoning real estate market.

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