Property

An algorithm in the US is being sued for slashing the value of homes

By Oliver Smith 12 May 2017
Summary

One homeowner is furious after $100,000 was knocked off the value of her home by a machine.

It’s become a key bargaining tool used by anyone looking to buy or sell a house; the property valuations offered by Zoopla in the UK or Zillow in the US.

But did you know these are actually drawn together by an algorithm, not a human?

With enough data on previous property sales, the local market and the features of a home, Zoopla says its software can value a property with a ‘high’ confidence.

But what happens when these algorithms get it wrong, slashing the value of your property?

Most Brits would probably grin and bear it but, across the pond, one home seller has launched a lawsuit against Zillow for knocking $100,000 off what she says is the value of her home.

Zoopla offers house price estimates across property markets and for individual homes.

Safe as houses?

Homeowner Barbara Andersen is arguing that estimates from sites like Zillow’s are marketed as appraisals of property, in which case they are unlicensed and illegal.

Andersen is currently trying to sell her house $626,000 but Zillow’s algorithm values the home at a far lower $544,806.

She argues that the software is getting it wrong because it’s based on data from houses in the cheaper parts of Illinois.

It’s not the first time that this kind of valuation has been found to be wrong, there are dozens of similar stores around Zoopla in the UK being more than £100,000 out on the true sale values of properties.

In Andersen’s case she isn’t actually looking for cash or compensation in her lawsuit, rather she’d just like Zillow’s estimate amended to better reflect what she argues is the actual price of her home.

Both Zoopla and Zillow do allow homeowners to add their own data points, like the number of bedrooms, bathrooms or the property’s size.

But there are always outliers, and should the house next door accept a fire sale price in their desperation to sell, is it fair that your home’s valuation should fall?

And should you really have to launch legal action to have these algorithmic valuations amended?