The new real estate Web site, Zillow.com, has been accused of purposely misleading users, reports the Los Angeles Times. The charges come from the National Community Reinvestment Coalition, a Washington, D.C.-based fair housing group.

The complaint has gone to the Federal Trade Commission  and charges that the Web site’s “Zestimates” are being used to overvalue properties and mislead buyers. The company says that they’re only making estimates and users are given fair warning.

Just for fun, I got a zestimate of my house and it seemed pretty comparable with the prices appearing on flyers that a variety of real estate agents send out every week or two. Whether that is accurate would only be verifiable if we actually looked for offers but now doesn’t seem a good time to do that given how many “For Sale” signs are already decorating front lawns all over town.

The problem for Zillow might be that it is better at catching the rising tide of prices than it is when it has to deal with a bear market. If all the sellers are holding out, there may not be too many comparables to get the prices right. And Zillow has provided a tool for owners to update details about their houses to improve accuracy but that seems like an invitation to exaggerate the home improvements.

In other real estate news, the Chickens Little (like us) who have been complaining about the profligate handing out of adjustable rate mortgages may have been crying too soon. a new survey from Wells Fargo suggests that most borrowers are aware of the coming increases, reports the Times. And the many of the rest are ready for the worst case scenario: If rates go up, they’ll refinance. Standard ARMs might be OK with that but those with increases coming on the back end may really struggle if they’re not already upside down.