Standards I – Sponsored By Zillow
Yesterday I received this feedback from TAF/IAC:
The voting process was completed for Zillow Group and they were approved as an IAC member with the required affirmative votes (two-thirds of the IAC members). Thank you for taking the time to vote.
My appraisal firm is a member of the Industry Advisory Council (IAC) of the Appraisal Foundation (TAF). I’ve presented to IAC in Washington and the people I’ve met at IAC are great. Before I get to Zillow, here are my thoughts about the structure of the TAF councils:
IAC = Pay to Play. In order to see how the sausage is made, members pay $2,500 per year to buy access to TAF executives, board chairs, and various staff. Members pay their way to the IAC meetings across the county, probably spending $10k to $15K annually. I only attended the meetings when they were in DC but each of those trips cost me about $1,500 round trip. I am not making the argument here that these companies shouldn’t have access to TAF, but it shouldn’t be on a pay to play basis. It is corporate elitism at its worst.
TAFAC = free. The other council is for private organizations, trade groups, individuals, and government agencies. There is no fee for these members, just travel costs. More importantly, TAFAC has wasted more than a decade with the bitter feud between Dave Bunton and the Appraisal Institute. But now, as Kelly Davids has said, AI and TAF are going to make beautiful music together?
I have mixed feelings about the set up of these two councils. How can a publicly accountable organization like TAF, require a fee from the private sector? Is ‘pay to play’ really appropriate for a non-profit that has government oversight?
In addition, the IAC is comprised of many AMCs, National mortgage companies because they can afford the costs. My firm’s membership appears to be an outlier in that regard.
Let’s Look At Zillow as a new IAC member
As an IAC member, I voted against Zillow becoming a member. Full disclosure: I was a member (and the sole appraiser) of the Trulia Industry Advisory Council before the Trulia website went live and left after Zillow purchased Trulia – The Trulia co-founders told me I was the only member that remained from the startup to buyout process.
Zillow got its start with its Zestimate tool, a consumer-based AVM, known for its wild inaccuracies. They claim a 5% median accuracy rate. To the informed, this means that the Zestimate is accurate within 5% of the actual value 50% of the time, but 50% of the time it is not. In other words, a Zillow association with TAF significantly dilutes the public trust in the appraisal industry – violating their public mandate.
There were no listings on Zillow when it started. I remembered the constant drumbeat of Zillow trying to have great relationships with the brokerage firms so they could get their listing feeds. Now Zillow is going into brokerage, betraying their years of denial as a potential competitor.
I remember the evening before Zillow launched, I was introduced to co-founder Rich Barton at a NYC party sponsored by Inman/Curbed by the founder of Curbed, Lockhart Steele. I asked Rich, who was very nice, “so what’ya do?” To which he told me he was the co-founder of Expedia (and had I heard of it) and was launching a real estate platform called “Zillow” the next day. He said the name “rhymes with pillow.”
From the start, Zillow made appraisers and brokers’ lives miserable as it was very inaccurate but grabbed the consumers’ attention to become a juggernaut. Accuracy improved over the years but it’s still at the mercy of the quality of the public record.
Zillow Valuation Inaccuracy
My friend and colleague Ryan Lundquist wrote a great post a few years ago on what a number of myself and my peers have also discovered. The Zillow algorithms now seem incredibly weighted to the list price.
I remember getting a visit from then Zillow President Lloyd Frink years ago at my office, also a very nice guy. I was very candid about Zestimates and walked through of the problems with the Zestimates. One problem in particular was my biggest pet peeve. Zestimates are rendered to the nearest dollar, which infers a precision that doesn’t exist. Again, protecting the public trust doesn’t seem to be a concern of theirs.
Here are some additional thoughts on Zillow’s IAC membership:
- Zillow seems to be using TAF to build credibility as a valuation source when its valuation reputation is poor. TAF just wants the money.
- Zillow seems to be the only IAC member that is NOT an appraiser or appraisal provider. TAF just wants the money.
And the most important consideration for IAC’s mistake in judgment is that because Dave Bunton is steering TAF away from accepting ASC grant money as Congress intended, they will become much more dependent on funds from other sources such as IAC members and Corporate sponsorships, continuing to shift away from their mission.
The Zillow decision and TAF’s actions are completely inappropriate for an organization that is supposed to protect the public trust.
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