I wonder how many other tech companies fit into this general category of "providing an equivalent to a regulated service without meeting the regulations". You've got the more obvious "sharing economy" type things which are in the news all over the place lately, but I bet there are a bunch of other companies like Zillow that have been flying under the radar for a while.
If a homeowner or homebuyer is paying someone to assess the value of a property, requiring expertise and training in inspection of a house such as materials, build quality, plumbing and whatnot, I could understand needing government approval.
This is just someone saying what they they think something is worth. Do I need a license before I can say "I think a certain car is only worth $25k instead of $30k"?
>If a homeowner or homebuyer is paying someone to assess the value of a property, requiring expertise and training in inspection of a house such as materials, build quality, plumbing and whatnot, I could understand needing government approval.
I've seen how appraisers appraise, and this comment brought out a laugh.
Their estimate is really no better than Zillow's.
They spend about 15-20 minutes looking at the property. They primarily measure dimensions and look at cosmetic stuff (no "inspection" whatsoever). Then they look at comparables and make an appraisal.
I asked one of them how they handle various items in their appraisal (solar panels, etc). The answer? "I have no idea what to do with those things, so I just ignore them."
The reality is many buyers will value stuff that the appraiser just plain ignores. This causes problems because the seller cannot increase their price due to those items - when it comes time for the buyer to get a loan, the appraisal will come out lower than the sale price and the bank won't approve.
I recall when I bought my house, the real estate agent had access to the appraiser.
Lots and lots of problems with the appraisal business. I don't know how much they make, but it's a good racket to get into that requires minimal work and pays well ($400-800 per appraisal - they spend more time driving to houses than examining them).
I think you're assuming way more thoroughness in the typical assessment of a property than is warranted by the practices. At least with respect to real estate taxes, in my experience assessments are pretty mechanical with respect to square footage and standard house features (number of bathrooms, etc.)
Assessments are different from inspections.
I don't really disagree with you though. There would seem to be a difference between someone being directly paid to assess something, perhaps largely based on standard formulas and practices and a web company providing housing estimates with no contractual relationship.
The actual Illinois law covers real estate appraisal, not other kinds (ie, cars). However, it defines an appraisal as the act of forming an opinion about the value of a piece of real estate. It then forbids doing it without a license. Not doing it for money, not communicating your opinion, but forming it. There are explicit exceptions for realtors, banks involved in real estate lending, and for private use (ie, appaising your own house).
So I would say Zestimates are clearly illegal according to the plain text of the law. However, I suspect this is one of those laws where a judge would find a convoluted reading to support his or her gut opinion that finding Zestimates illegal is ridiculous. I think you could also make a pretty reasonable claim that the freedom to form an opinion about the value of something is an unenumerated, but nonetheless inalienable right, and therefore the law is unconstitutional.
There are some rules around someone saying what a home is 'worth' when we were recently buying our house the realtor had a couple tools for estimating sale price but every email with them was extremely adamant that it was not an estimate of worth because that would require a full appraisal. Maybe she was being overly cautious but it was so constant I have to believe there were some very real restrictions she was working with.
So when you go to a company and ask for a bank loan secured against a car, or to insure your car against loss, you might want to have some common standards recognized by insurers or loan providers as to what constitutes a 'fair value'. You would be a bit upset if you filed an insurance claim on your car, and the underwriter came back and said 'I asked @lotsofpulp and they said your car is worth $25K instead of $30K'. You might question what credentials @lotsofpulp has to value cars.
Now, you might argue that there are market based or self-regulated solutions to that, and that's reasonable (fact is that a lot of the industry goes off 'de facto' standards for valuing cars, like KBB), but the fact is that sometimes a government regulation is necessary to prevent anticonsumer or anticompetitive practices, especially in the finance industry.
This isn't the same thing. This would be you putting up a web site that tracks cars and the ones for sale you'd say how much you think it's worth. Do it once, you're just a guy (or gal) saying something. Do it all the time and you become somewhat of an authority figure. That's the difference.
A home appraisal is not the same thing as a home inspection, the latter being much more thorough,looking for condition of home mechanics, and structure.
"...the fact that they offer market-value estimates and 'are promoted as a tool for potential buyers to use in assessing [the] market value of a given property,' shows that they meet the definition of an appraisal under state law. Not only should Zillow be licensed to perform appraisals before offering such estimates"
It can be surprising when seemingly innocuous activities are in fact heavily regulated (cf. Stanford needing to remove all their learning videos from their website).
I don't believe the article is correct in the definition of appraisals.
A valuation or an approximation of value by impartial, properly qualified persons; the process of determining the value of an asset or liability, which entails expert opinion rather than express commercial transactions.
When the value of your $100000, $200000, $300000, or more home can be greatly affected by a someone else's declared valuation of your home, its how you get regulations.
this should be. it's a market with few sales at high costs heavily interwinded with the mortgage market.
having a de facto monopoly on what's considered a fair value, rightly or wrongly, opens up bank people and real estate agents to all kind of manipulation.
by manipulating their equation they can help lowball the sales price of an entire area, they can both profit directly out of this, indirectly through stock manipulation and even cause trouble to the whole banking sector devaluing mortgadget properties
But how does getting an appraisal license protect bank people and real estate agents? Isn't an appraiser subject to the same moral shortcomings as any regular person?
And only allowing state licensed appraisers to give value estimates does exactly what you are trying to avoid. It creates a state owned monopoly on housing estimates.
Zillow would lose credibility and it would hurt the core of their business if it was found that they company was purposely deceiving people about the value of their homes so that they could directly profit from it. They might also open themselves up to legal repercussions in that case for just plain old fraud as well.
It's easy to defraud one of the parties in a real estate transaction (usually the bank; they have the money) if the other parties, including the appraiser, collude. The appraiser is supposed to be independent, and the license is a stamp of professional ethics.
If a licensed appraiser acts fraudulently, you have grounds to sue their hinders off.
