Arizona Bans Zillow

Arizona regulators slapped the popular home-valuation site Zillow with a cease and desist order on doing business in the state, saying the service was providing appraisals without a license.

Never mind that the automated listings the Seattle-based company provides are a far cry from a person walking through your house and tapping the bricks.

This is an obvious rear guard action by the real estate community trying to protect their good ol’ boy network and strangle the flow of information to consumers. Let’s hope Zillow can appeal, and Arizona’s action doesn’t inspire other states. — BEN POPKEN

Arizona bars online home price estimator [AP] (Thanks to Jame!)

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  1. mikesfree says:

    Now that is some BS. I am tired of the states protecting overpriced services.

  2. arcticJKL says:

    Is Zillow based in Arizona or is the state trying to regulate interstate commerce?

  3. kimbot says:

    That doesn’t make any sense to me. Zillow is so far from accurate that it wouldn’t take the place of an actual appraisal. I just bought a fixer upper for $50,000 that Zillow lists as being worth $70,000. They don’t take into account the paneling on the walls and the cracked foundation. I would never trust Zillow in the place of an actual person.

  4. humphrmi says:

    Kimbot, you’re right – you shouldn’t use Zillow to make a purchase decision. There’s a but coming. Get ready. :)

    BUT… in my experience the appraisers that banks / mortgage companies hire to do this don’t do much more than Zillow. When I purchased my house, and refinanced twice, nobody ever walked through my house, or tapped on the bricks (and I have bricks to tap). It mostly consisted of a drive-by, maybe once they stopped and actually took a picture of the house.

    IMHO the problem isn’t Zillow, they’re providing the same services that most appraisers provide. The problem is the expectation of what an appraiser should provide, and that is a consumer decision, not the government’s.

  5. zero_o says:

    he government needs to not be protectionist when it comes to the Realtor association. It is the same thing the Realtor association tried to pull (and it some cases did pull) by banning the Forsalebyowner type websites because they were not charging 6%. Title insurance is another industry that the government loves to protect at the expense of consumers because they have big $$ and they like to spend it on the lobbyists.

  6. mopar_man says:

    BUT… in my experience the appraisers that banks / mortgage companies hire to do this don’t do much more than Zillow.

    Really?? When I bought my house, the guy was there for over an hour. He was up on the roof of the house and garage, in the crawl space under the addition and into the darkest corners of the basement. He went over EVERYTHING.

  7. not_seth_brundle says:

    @mopar_man: Was that an appraiser retained by the bank, or an inspector retained by you?

  8. mac-phisto says:

    wow, does arizona really need another reason not to buy property there?

    @mopar_man: did you have an inspection done? if not, that may explain the tedious appraisal. or maybe you got one of the old guard honest types.

    i had a drive-by appraisal also. my understanding is that most appraisers just look at the offer & set the value at that price plus a grand or so anyway. i bought my property for $50,000 less than what the guy listed it for, but i’m pretty sure if i paid face value the appraisal would’ve come back just fine.

    i will say that zillow was an excellent tool for me during the homebuying process & if it wasn’t for the information i obtained there, i would’ve paid A LOT more for my home.

  9. etinterrapax says:

    I’m trying to remember where I just read/saw that Zillow is especially inaccurate in Phoenix right now. It was probably NYT or CNN, where I usually read real estate news. Realtors hated it because it gave would-be clients a tremendously inflated sense of what their homes were worth. I bet anything this has something to do with that. And I wouldn’t be surprised if it correlated with a higher number of homes FSBO. When people don’t like the number a realtor gives them, they’ll sometimes put it on the market directly and figure they can get their price and save commission to boot, assuming the realtor will sell their home for less than it’s worth just to get a quick commission and a reputation for fast turnover.

  10. revmatty says:

    In my metro area (STL), zillow is generally about 15-20% over going market rate (or more). Wildly inaccurate would be a charitable description. There’s homes on my street that have sold in the past 6 months, so I know what they went for, and in each case zillow has them being listed as worth $250 K when the reality is more like $180-$195.

  11. Anonymously says:

    I lot of times the appraisal is a drive-by or BPO. Nobody would use Zillow as part of a real estate transaction, although other, certified AVM solutions are used.

  12. huadpe says:

    Appraisers do two main types of appraisals, and you pick which you’d like when you hire them. A drive-by appraisal takes a quick look at the actual property and neighborhood, and largely gets its numbers from nearby houses that have sold, as well as any recent sales of the house in question. This type of appraisal is appropriate for houses in a large development with similar/identical properties and for houses which have sold very recently. It is also cheaper, and when brokers and/or banks advertize low fees, this is one of the areas where they can cut corners.

    The second type is the type mopar was talking about, which involves going in and doing a detailed inspection. This is appropriate for any house, but is needed for houses which are not cookie-cutter or in neighborhoods with particularly low turnover. It also costs more. So your realtor or lender fees will be higher.

    For some houses, Zillow can give you a decent price call, but other times it’s way off the mark. I don’t see what the Arizona people are so worried about though. I still want a professional to sign off on the number, even if it ends up being the same as Zillow’s.

  13. Mr. Gunn says:

    Ben, you like to call CEOs and stuff. Call some Arizona legislators and ask them if they think sites like this will clog the tubes.

  14. MercuryPDX says:

    I looked up my house (and by default the surrounding neighborhood) and if the prices aren’t dead on, they’re within $5000.

  15. PDQ says:

    mac-phisto said:

    “i had a drive-by appraisal also. my understanding is that most appraisers just look at the offer & set the value at that price plus a grand or so anyway. i bought my property for $50,000 less than what the guy listed it for, but i’m pretty sure if i paid face value the appraisal would’ve come back just fine.”

    Just look at the offer and set the value at that price plus a grand or so…….????? I’m not surprised of course. Not when everyone and their brother is “in real estate”. You wind up with shady agents, shady appraisers, shady escrow officers, shady mortgage brokers, etc.

    I love the smell of real estate fraud in the morning……..

  16. Greeper says:

    Hopefully Zillow will just ignore it. THere is a public interest law firm that challenges these type of regulations, which are passed in the name of “public interest” but really patronage for special interests. THey were the firm that had wine import laws struck down by the Supreme Court. http://www.ij.org.

  17. arcticJKL says:

    I agree Zillow doesnt give very accurate info regarding the value of the house.

    Where it is useful is telling me what a house sold for. Zillow, if I am not mistaken, uses public records for that. It is nice to know the house selling for 700k last sold for 50K.

    The realtors have their own site (http://vcrdsmls.rapmls.com/) that need to be combined with a zillow interface.

  18. MeOhMy says:

    What are they worried about? Zillow can’t compel a lender to change their appraisal. Your lender’s appraiser says the house appraises for $100k, they’re not going to loan you $500k just because Zillow says so.

    It’s another tool to help consumers negotiate the absurd process of buying real estate. What next, they gonna ban Edmunds and KBB?

  19. bsheairs says:

    I currently have a home listed on Zillow that I’m trying to sell “by owner”, without acutally shelling out for a MLS number. I’ve been able to generate about 600 views on my property via the site this past month alone, and I’ve been able to give people a link to my home images/description from Craigslist. It’s a no-cost option for people who want to sell their home as inexpensively as possible.

    I feel that this action in AZ is a direct response to Zillow’s ability to replace the “old boy” network of realtors and the MLS system (which costs hundreds of dollars to be listed through an agent).

    Long Live ZILLOW! (and if anyone is looking for a home in the southern NJ/Philadelphia area, please give me a shout; sheairs@yahoo.com ; No realtors, please.)

  20. rekoil says:

    Anyone want to explain how Arizona can force a company based in Washington to not do business in Arizona? Not accept advertisers in that state?

  21. l951b951 says:

    As a Realtor, I’m a little offended by the “I had a bad experience-the entire trade is crooked” mindset.

    There are crappy Realtors. There are crappy lenders. There are crappy appraisers. They tend to be the exception and the market culls them quickly. Please don’t disparage an entire profession for the sins of a few. I try to be a professional in all my business endeavors, and I work hard to earn any brokerage fees. I’ve seen drive by appraisers, but my state requires licensing to be an appraiser and most do a thorough, professional job.

    On topic: zillow gives inaccurate data in my area. They tend to be 15%+ either under or over.

    @arcticJKL: the rapmls.com link may be for a local Realtor association, but the only official site from the National Association of Realtors is Realtor.com .

  22. Greasy Thumb Guzik says:

    @rekoil:
    They would have to go into FEDERAL COURT to get a court order banning Zillow.

    At that point, Zillow’s lawyers would ask how Arizona can regulate a company with no presence in Arizona.

    Then the judge throws out Arizona’s case & finds the state’s lawyers have violated Rule 11 of the Federal Rules Of Procedure & fines the lawyers.

    End of case!

  23. pdxappraiser says:

    “There are crappy Realtors. There are crappy lenders. There are crappy appraisers. They tend to be the exception and the market culls them quickly. Please don’t disparage an entire profession for the sins of a few. I try to be a professional in all my business endeavors, and I work hard to earn any brokerage fees. I’ve seen drive by appraisers, but my state requires licensing to be an appraiser and most do a thorough, professional job.”

    I am a Real Estate Appraiser, and I agree to an extent with what is said here. I want to add a few more wrinkles to this discussion:

    1) Not only does the market cull bad appraisers, but the law does, as well. Appraisers are easily the most-regulated component of any mortgage transaction. We go through hundreds of classroom and thousands of apprenticeship hours to become licensed or certified, and are subject to fines or delicensure if we, as someone else said, “take the sales price and add $1,000.”

    2) As for drive-by appraisals, there’s nothing inherently less above-board in a drive-by appraisal. It’s a choice the client makes as far as the scope of work of an appraiser. The same process is followed of choosing the most appropriate comparables based on the data available, adjusting those comparables as the market requires, and reconciling that data based on the market trends. From what I understand of Zillow’s technique, they simply look for houses of similar square footage (according to county) and take an average.

  24. bradleyh says:

    You know, I really don’t think its bad that the state wants this test. I used to work at Rent.com, where we basically took a comission any time the user signed a lease with the property. We were also doing the work an agent would do and an agent would have to be licensed, so we knew we would be also. So we went and got licensed in all the states where we did business, and it was just a cost of doing business. Frankly, I’m surprised Zillow hadn’t already gotten licensed in the states where it does business. The legal team should have found that at the very least.

  25. catchthefever says:

    I live in Arizona. The legislature, local governments, etc. ALWAYS vote in the favor of real estate and construction. Mind you that the roads are crap and do not support all the new development. Heaven forbid that the a-holes building all the Olive Garden’s and Wal-Mart’s put a freaking PENNY towards the cost of the traffic they create. Nope, it’s the taxpayer’s responsibility to foot the bill for these boring uninspired restaurants and the same boring stores on every street corner.

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  27. humphrmi says:

    @pdxappraiser: In my case the several drive-by appraisals I got were, I’m sure, ordered that way by the bank that was doing my refi, and frankly I don’t (or didn’t) really care, as long as I got the value I needed to do the deal. If they got 90% of the value of my home from comps, whatever, I got the loan.

    The point is that AZ is saying that Zillow is doing an appraiser’s job without a license. Ok, let’s look at that. Obviously Zillow relies on comps and whatever an owner chooses to put in about the value of their home. I’m not even sure why the connection to appraisers was made. A bank is not going to rely on a Zillow value to write a loan, for crying out loud, so why is AZ thinking that Zillow is doing an appraiser’s job without a license? It doesn’t make any sense. Does it to you, as an appraiser?

  28. mac-phisto says:

    i know a lot of great people in the homebuying industry. & i know a lot of “poorly trained” people also. they are not, by any means a small minority.

    if an appraisal doesn’t come in, standard procedure is to have a property reappraised or to challenge the appraisal. if an appraisal comes in too high, the procedure is the same. in my experience, this is rare. rare to the point that when it happened three times within a few months of each other, we contracted with a new appraiser. i happened to think our former appraiser was very good – perhaps he erred on the side of caution once too often.

    from my perspective (which is on the lending side), appraisers are not much more than a rubber stamp – especially drive-bys. they rely on business from lenders & brokers who make money CLOSING loans, not denying them. if a broker or lender is incapable of closing loans b/c their appraiser consistently comes in too high or too low, they find a new one & mr. honest appraiser who is trying to protect everyone’s interest is unemployed. the problem is simple: if i turn away a qualified homebuyer, s/he is going to get the loan somewhere else. if an appraisal is holding up an otherwise stellar property transaction, i will get the appraisal to come in. i don’t care if i have to call tony two toes to make it happen.

  29. pdxappraiser says:

    “A bank is not going to rely on a Zillow value to write a loan, for crying out loud, so why is AZ thinking that Zillow is doing an appraiser’s job without a license? It doesn’t make any sense. Does it to you, as an appraiser?”

    Well, it does and it doesn’t. An appraisal is defined by federal regs as “the act or process of developing an opinion of value, an opinion of value; of or pertaining to appraising and related functions such as appraisal practice or appraisal services.” It’s not just a process used to qualify for a loan.

    Now, on the flip side, obviously realtors for example provide value estimates all the time, which are called valuation services, not appraisals; the test – as my non-lawyer self understands it – is whether the recipient of the services BELIEVES that he or she is receiving an appraisal. If Arizona thinks that users of Zillow believe that the product they’re receiving is an appraisal, then Zillow’s product is a de facto appraisal product and therefore regulated by both federal and state laws.

    I don’t necessarily think that all that is completely logical, though. I’m just talking about the state of the law as I understand it. The states have the power to regulate appraisal services in their state, and it seems (again to my non-lawyer self) that this means they technically can keep Zillow from providing services in their state.

    It’ll be interesting to see how this shakes out. If Zillow put a glowing red disclaimer “this is not an appraisal” on every single page – would that be enough?

  30. pdxappraiser says:

    Also, for what it’s worth, the kind of rubber-stamping mac-phisto is talking about is essentially what caused the S&L meltdown of the 80s, and what led to the high amount of regulation of the appraisal industry in the first place.

  31. pdxappraiser says:

    “essentially what caused the S&L meltdown of the 80s”

    I probably should have said “played a major role in the…” but you get the idea.

  32. mac-phisto says:

    so, when exactly did the regulation stop?

  33. pdxappraiser says:

    That’s the point: It didn’t. Some of the practices you’re alluding to are at best questionable and at worst illegal and worthy of fines and delicensure for the appraiser involved.

  34. mac-phisto says:

    you’re right, calling tony would be illegal. but it’s no secret that appraisers have little real say in the valuation of a property.

    i have to be honest. i really have no confidence whatsoever in (many) appraisers & all drive-by appraisals. even less so since i bought my house. every “fact sheet” i have seen on my property is wrong. from square footage, to number of rooms, to number of bedrooms…they all differ & none of them are accurate. how can an appraisal on a fictional property compared to other fictional properties be worth the paper it’s drawn up on?

  35. macbaloni says:

    You all talk like you work for zillow the company is using your tax or refi work up to do there estimate thats fine and great when they over appraise your house but they have my home listed 50,000 less than its recent appraised value and it was appraised at another 35k more two years ago which shows the market decline adj. now when im trying to sell my house buyers use zillow and offer me whats on the sight theres a reason why there are lic appraisels whatever you may think your opinion is that of someone who has no interest in the value of your property the most important asset you’ll ever have in regards to financing! You cant start letting some computer programmer estimate house values and influence an entire market especially from washington what on earth do they know about a house! Wait until they are affecting your pockets then you look at zillow from the right point of view if your house isnt up for sale you have no need to respond to zillow unless you work for them which no doubt half the positive bloggers do pos propaganda for there website in which they are getting rich off my homes photos without our homes they have no site! It is also an invasion of privacy for someone to post satellite photos of your home over the www whats next they are going to tell me what I can charge for my business and how much my grocery bill should be these web start ups are getting out of hand start regulating them we have enough free info that is all false anyway my neighbors wood frame house built 15 years ago and half the square footage is value near my brand new concrete block home that i paid twice as much for get real people! ZIllow sucks!