Zestimate v. The Assessment – Property Estimate from Zillow.com was not Probative Evidence of a Home’s Value According to the Indiana Board of Tax Review

Zestimate v. The Assessment – Property Estimate from Zillow.com was not Probative Evidence of a Home’s Value According to the Indiana Board of Tax Review

Catie Wheatley explains why the Indiana Board of Tax Review did not consider estimates from Zillow.com to be probative evidence of a home’s value in a property tax appeal.

In Harris v. Madison County Assessor (April 2, 2019), an Indiana Homeowner contested the January 1, 2017 assessment of her residence in Anderson.  She had the burden of proof on appeal, and the Indiana Board of Tax Review wanted to know why Homeowner thought her home was overvalued. Her answer, in part? Because she checked Zillow.

Zillow is a Seattle company that maintains an online database of U.S. homes for sale and for rent. It provides residential property estimates (“Zestimates”) that are calculated from publicly available and user-submitted data. Zillow takes this data and runs it through a secret algorithm to come up with the Zestimate.

According to Homeowner, the Zestimate value was approximately $20,000 less than the home’s assessed value. The Indiana Board ruled that the Zestimate was not probative evidence, explaining, “[e]stimates posted on websites relying on unidentified data sources and employing unknown methodologies are simply not credible.” In addition, the Indiana Board noted that Homeowner testified to viewing the Zestimate shortly after buying the property, and she “failed to relate Zillow.com’s [2012] estimate to the relevant valuation date” – a gap of more than four years.

Homeowner is not alone in relying on Zillow in valuation disputes. In a unique case, Anthony Baxter, who plead guilty to mortgage fraud, argued that his counsel was ineffective under the theory that his sentence range was miscalculated because the value used to determine the amount of loss was too low. United States v. Baxter, No. Crim. A. 11-681, 2015 WL 1344664, at *1 (E.D. Pa. Mar. 24, 2015), aff’d, 684 F. App’x 133 (3d Cir. 2017). The disputed value in Baxter was based on Zillow. In that case, the court said that the Zillow value was “more reliable” than the prior assessment value. The court reasoned that, because the assessment had not been updated from 2008 until the time of conviction in 2012, and because over that time there were economic changes that decreased the value of the property, the Zestimate – which did not take into account the fact that the property was “vacant, unkempt and subject to a foreclosure sale” – was a reasonable figure on which defendant’s counsel could rely.

The Indiana Board of Tax Review is in good company in its refusal to accept Zestimates for home values. New Hampshire’s Supreme Court in 2015 concluded that, because the sources and accuracy of Zillow cannot be verified (secret algorithm, etc.), a lower court’s reliance on it to value the marital home in a divorce proceeding was reversible error.  In re Rokowski, 121 A.3d 284, 287 (2015).

Concern over the use of Zillow values exists outside of the courtroom as well. Last year, the Chicago Tribune reported that then Cook County Assessor Joe Berrios was criticized for allowing assessors to use Zillow to determine home values instead of assessing the properties in person. See Hal Dardick, “Berrios’ Analysts Used Zillow, Other Shortcuts in Assessing Property Values,” CHI. TRIB. (July 13, 2018).

Of course, Zillow, which now claims its Zestimates have a median error of 1.9% for on-market homes (recently updated from 4.3%), may be fine for informal use. Newcomers to a housing market can use it to get their bearings; families dreaming of their next home can use it to get the lay of land with no risk and little effort. But, given the Indiana Board of Tax Review’s reaction to Homeowner’s “evidence” this spring, Hoosier taxpayers should be cautious in relying on this information, standing alone, to support challenges to their assessments.

In this appeal, Homeowner further contended that the property required substantial repairs, which she identified (e.g. “the large picture window is rotting and needs to be replaced” and “there is structural damage to the chimney and it does not work”). These issues “likely have a negative effect on [the home’s] value,” the Board conceded, but “statements that are unsupported by probative evidence are conclusory and of no value to the Board in making its determination.”

Moreover, Homeowner noted that her home was assessed for about $12,000 more than what she paid for it. While a property’s purchase price “can be the best evidence of its value,” Homeowner failed to relate the 2012 purchase price to the January 1, 2017 assessment date. Thus, the Board affirmed the property’s assessment.

Catie Wheatley is a summer associate at Faegre Baker Daniels.

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