What’s Up With Zillow?
June 24, 2008
Interesting and open, this is how I would characterize Jorrit Van Der Meulen, the Vice President of Partner Relations for Zillow. I had the opportunity to hear Mr. Van Der Meulen talk at my monthly Forum XXII networking meeting. He shared some of the history of the Zillow, the missteps, changes in direction, and future goals. For those agents out there, Zillow is NOT our competitor, but is trying to be a partner in our real estate business. This piece is an effort to understand Zillow’s current and future business model.
Initially Zillow hoped to change the way real estate business was conducted. But shortly after forming, the company realized the real estate industry “takeover” was probably not going to happen. The powers that be at Zillow recognized the real estate industry was far too complex to completely revamp.
Zillow has gone through several gyrations over the short history of the company. After many focus groups the company zeroed in on giving consumers information regarding prices, thus the infamous “Zestimate” was born. (*Zestimate is a registered Trademark of Zillow.) Zillow’s goal was to put a price point on every home in the United States. Mr. Van Der Meulen admits there’s a huge disparity between MLS, multiple listing data, and tax records. He stated Zillow is “not trying to give anyone the price for a house.” The “Zestimate” is “the starting point of a conversation”. He followed this with a recommendation for people to talk with real estate professionals, “someone who knows the real values”.
When asked about the 5 year plan for the company, Mr. Van Der Meulen talked about an expanded company offering. The company’s goal is to create an information site that generates revenue through advertising. They’ve launched a free mortgage site that’ll be transformed into a future revenue producer for Zillow and lenders. There’ll be a home improvement services component to the site and, again, the hope is to generate advertising revenue. Zillow’s online discussions are great, giving people the chance to talk about a myriad of real estate issues. There’s a whole host of question and answer pages which also give great information about the home buying and selling process. These pages are a great benefit to the public.
Back to the “Zestimate”, Zillow has always been a big question for me because the information provided is often inaccurate. Yes, they have all kinds of algorithms and tests to increase the accuracy of data and, yes, a home owner can claim a home and update the information. But at the end of the day, most of the pricing data Zillow provides is inaccurate. I rarely ever look at “Zestimates” for that reason.
But what’s the public’s perception of these values? Do most people look at the “Zestimate” as the gospel on pricing or at a “starting point for a conversation”? Is the consumer better served with this inaccurate information or is this information a detriment?
I advertise my listings on Zillow because I believe homes should be marketed wherever buyers are looking online. But I’ve always been concerned about the inaccuracy of Zillow’s data when advertising listings. The inaccurate Zillow data could influence a potential buyer or seller to make a bad real estate decision.
The comparables given for a home are nearby home sales, which may or may not have any correlation to a home’s value. For example, two comparables given for one of my listings, a ranch style home, varied greatly. My listing has new windows, carpets, moldings, doors, drop dead, private, gorgeous backyard and was impeccably maintained by its owners. The first comparable Zillow used was a ranch style home, whereas the second comparable was a duplex style home in a planned neighborhood. Someone looking at the second comparable would have no way of knowing it’s a duplex, because legally it’s considered a “single family residence.” Clearly, the duplex style home is not at all similar, but how would the public know? Ironically, the ranch style home was more comparable to the advertised home, but only on paper. Although similar in square footage, it was a completely different home. It had absolutely no updating and everything was original. It had an eyesore located in front of it and backed to the noise wall barrier of a busy highway. The backyard was small and so noisy as to render it unusable.
Joseph Ferrara’s blog, Sellsius Real Estate, has had interesting discussions about Zestimates and Zillow. Sellsius’ believes home owners should have the ultimate decision as to whether their home’s value goes online. To Sellsius, it’s a matter of choice, whereas, Zillow deems transparency of data is more important than choice, even if the data is inaccurate. When I mentioned this ongoing Sellsius discussion at our meeting, Mr. Van Der Meulen was clear that Zillow’s “transparency” whether accurate or inaccurate trumped choice. (And yes, I do know people can claim their homes and update the data. Another Realtor mentioned some home owners don’t want to publicize, perhaps to the tax assessor, their home is not what Zillow states.)
Zillow is a company still in its infancy that seems to be looking to grow and develop a relevant business model. They’re fortunate as a company to have the luxury to find their way. Here’s hoping they do and are able to provide something truly meaningful and different to the consumer. After all, it seems this was their original premise. For now, as a real estate professional, I’d like to see disclaimers about the values given and recommendations for the public to talk to real estate professionals, since Zillow is the “start to a conversation.”
Eastside Real Estate Buzz
June 24, 2008 at 7:04 pm
A very thoughtful post.
I respectfully disagree that “transparency” trumps choice when discussing zestimates. One must define transparency in the context of zestimates. The publication of public “facts” is the transparency I support, not proprietary, computer generated estimates of the market value of my client’s home, without ever visiting it. Bear in mind the data supporting that zestimate may also include inaccurate facts. Inaccurate facts are not made accurate by publishing them on Zillow. (correcting them requires an owner to claim a home and risk increased property taxes, according to Seattle PI)
I think the comparison should be between accurate facts and inaccurate, possibly misleading information– of which zestimates qualify. Misleading information trumps nothing is my book, even though it be dressed in a transparent gown.
I chose this statement by you which summarizes my view on the subject. Why is it valuable to the discussion? Simply because it comes from a person who actually markets and sells homes, unlike Zillow.
“But I’ve always been concerned about the inaccuracy of Zillow’s data when advertising listings. The inaccurate Zillow data could influence a potential buyer or seller to make a bad real estate decision.’
(I ought copy this and paste it in every discussion I have about zestimates, with your permission)
I have used this analogy to illustrate your point:
Let’s say I show up at one of your open houses (listed for sale conservatively at $400K) with a sign and flyers I hand out to buyers from the sidewalk that says “Based on public data, tax assessor info and comparable home sales, this home’s market value is estimated by Zillow (created by the owner of Expedia) to be $329K and the median error rate in this market is 7%” That would give a buyer pause to reflect and walk away.
Now, you may say, that’s fine, I can explain away the $349K– but the buyers may turn away before you get to them and you may not convince all buyers you do get to that the $349 is unrealistic– you may also lower the offers you get (those that mistrust realtors and think zestimates are reliable)— all for some notion that transparency requires an inaccurate computer generated starting point of $349K to enter the equation– that is not my definition of transparency, it is my definition of misleading information interfering with the marketing of my client’s home. But keep this last point in mind: You are NOT there when prospective buyers go to the house online — you cannot engage them face to face as you would me on your front lawn. That is a meaningful difference to me.
Now, I respect Mr.VDM opinion’s to allow a inaccurate value to attach to his client’s property in the name of transparency, but I think my client’s best interests are not served by it.
Read this post for options you, as the listing agent, have to get 2 listing pages on zillow. This is a choice of sorts.
http://tinyurl.com/6cxh63
June 24, 2008 at 7:53 pm
Zillow is still undisputable leader in online real-estate brokering.
June 24, 2008 at 8:12 pm
Hi Joseph,
I was hoping you would stop by. Thanks for doing so. I’ve been following your “I am Curious Zillow” posts and have not yet had a chance to plug in one of my listings without the house number to see how that works. I’ll check it out, and yes, feel free to quote me.
I came away from the meeting feeling Zillow is still trying to find its way as a viable information resource. I would not be surprised if their “services” continue to change over the years, until they find their market niche.
Right now, I see Zillow trying to compete with Trulia, although Trulia is not out there giving incorrect property values.
I’m lucky to be working in real estate in one of the most internet savvy markets in the country. Many of my listings are a stone’s throw from Microsoft, so most of the people I work with know how to look at Zillow and understand the “Zestimate” is not always accurate.
My concern, as I said in my piece, is for those people who are not as savvy and are not aware that “Zestimates” are a “start of a conversation”. Maybe the disclaimer should be: Zestimates are cocktail party conversation only, not to be confused with true real estate market value!
———————–
I’ll come introduce myself to you in SF at Inman.
June 24, 2008 at 8:23 pm
HDB,
Can you clarify what you mean by “undisputable leader in online real-estate brokering?” It is my understanding Zillow is not a real estate brokerage.
June 25, 2008 at 6:20 am
Yes, quite right. I look forward to meeting you at Inman, Debra.
June 25, 2008 at 6:57 am
Very informative blog indeed. And I do think that real estate is not going to boom in near future as it was in the pasr. Have the author given a try to Glyphius ? He can at least try it once.
June 25, 2008 at 7:12 am
Joseph,
I’m looking forward to Blogger’s Connect.
June 26, 2008 at 6:49 am
Debra,
Thanks for the email today and the link. These are interesting conversations here. I, and 5 million others every month, believe strongly that Zillow is much much more than a cocktail party conversation starter. In fact, a CAR study last year indicated that over 50% of buyers surveyed said they used Zillow as part of their buying experience. This was far away bigger than any site other than Realtor.com.
Consumers strongly value what we do. They value the zestimate - that is still the primary reason they come to the site. By and large, they understand it is a starting point. It isn’t necessarily an ending point. But, we track our accuracy versus most every recorded sale (millions a year) and we *publish* that accuracy on every page (in the form of the value range) and in aggregate on our accuracy page. We are not only transparent with the zestimate; we are transparent with our grade.
I continue to believe that it would be great if the industry was equally transparent. It would be great if I could see an “original list price” to “actual selling price” accuracy chart by agent in my area. My home, which I have listed, was priced at $1.59 originally and was a “sure sell”. Today I signed papers to take the price to $1.25 (after lowering to $1.475 based on advice of my agent). It’s a difficult market. I get that. But, I think transparency helps on all fronts.
I do agree that we will continue to find our way with services for consumers and real estate professionals. We have a number of great ideas in the works and we will soon be introducing a number of new ways for agents, brokers, lenders and other professionals to get guaranteed exposure to our audience (these will be ads).
Thanks again for having me and please don’t hesitate to reach out to me directly if you have further comments/questions about Zillow.
June 26, 2008 at 1:14 pm
Hi Jorrit,
Thanks for your response. Kudos for the amount of traffic you get. As I mentioned above, Zillow has great information about the home buying and selling process. I think this information is of great benefit to the consumer.
However, it still seems the consumer is not as clear, as you mention, to viewing the “Zestimate” as a starting point.
I agree with transparency. The real estate industry is moving in that direction. In the near future, the number of “Days on Market” for a listed property will be available on public sites, again, giving the consumer more information.
“It would be great if I could see an “original list price” to “actual selling price” accuracy chart by agent in my area.”
Interesting you should mention this idea, as this is exactly what I do on two other blogs I write for specfic neighborhoods. It’s valuable information for home buyers and sellers. It represents what’s truly happening in their “neck of the woods.” When I report sales information in these neighborhoods, I report the original list price, the final list price, and the actual sales price.
http://westredmondrealestatebuzz.com/2008/06/20/weekly-real-estate-buzz-in-west-redmond-through-june-19th-2008/
http://kirklandhighlandsrealestatebuzz.com/2008/06/20/weekly-kirkland-highlands-real-estate-buzz-through-june-19th-2008/
I expect you have some great ideas in the works, as you say, and am looking forward to what Zillow will offer in the future. Good luck with the sale of your home.
June 26, 2008 at 1:15 pm
Dhanajay,
I’ll check Glyphius out. I read a very postive article about it on Copyblogger. Thanks for stopping by.
June 28, 2008 at 9:22 pm
I’ve been using Zillow for a few years now. I regard it as a great tool but I’m not sure about it being the indisputable leader in online real-estate brokering. I’m not sure what that means, but it is a great tool. There’s another one I’ve been using for the last few months that has some different features that help out a lot. I don’t think they’re competition but help buyers, sellers, and realtors alike. It’s a google maps/mls/realtytrac mashup by PropertyMaps.
June 28, 2008 at 10:18 pm
Thanks, Ed. Google Maps provides great information. Zillow does provide useful information. It’s just their main tool, the “Zestimate” is so wrong most of the time. The inaccuracy of the “Zestimate” can hurt consumers by not providing the right information.
July 6, 2008 at 7:30 pm
Zillow is yet another internet “tool” that the public hopes and prays will bring an end to the classic real estate model of using real estate professionals to help them purchase and sell property. Please forgive me for being so blunt but until one has personally previewed homes in a particular neighborhood: driven to them, looked at the neighborhood, walked through them, smelled them, pondered them, etc., no fancy algorithims or computer models can capture the value of a property. Just try going to a bank with a “zestimate” to prove the value of your home.
July 6, 2008 at 8:06 pm
Hi James,
It’s okay if you are blunt. As I said, I still think Zillow is trying to find its way. It may turn into a mortgage/home information resource, but it will never replace seeing homes in real time and knowing the real value of a home in the marketplace.