Zillow.com launched in beta today, offering free home-value estimates and data on more than 60 million houses in the United States.
Zillow’s founder and CEO Richard Barton is well known for creating online travel giant Expedia, which transformed the traditional travel industry by using the Internet to offer travel information directly to consumers.
The company has attracted much attention in its pre-launch stage over the last year, with many speculating that Zillow’s team could force drastic change in the real estate industry — which historically has been resistant to new entrants.
The Seattle-based company is positioning itself as a provider of research tools and information to help real estate consumers perform more research on their own.
Site users can go to Zillow.com and enter their address to get their home’s “Zestimate,” the term the company is using for home valuation estimates calculated through Zillow. The “Zestimates” are updated daily using the company’s compiled public data and an algorithm created by its statisticians to reflect the current market value.
“We take the tax information, prior sales of homes and comparable transactions in the immediate area and from that we’re able to estimate (the home’s value) based on similar area sales,” said company spokeswoman Amy Bohutinsky.
The algorithm has a 7.2 percent margin of error, she said. Zillow’s statisticians constantly test the algorithm by comparing the actual sales price of homes when they’re sold with the calculated “Zestimate.”
“Where we do best are homes in the mid-range,” Bohutinsky said, adding that the estimates are less accurate with homes at the lower and upper ends of the market.
The company has collected 2 terabytes of data on U.S. homes, according to Barton, who warns that data in some parts of the country is much better than others. For instance, he said the data tends to be more solid in markets where more homes have been sold in recent years than those with fewer sales because the county records were updated more recently.
“All along the West Coast was really good,” said Bohutinsky. “Where it’s most spotty are East Coast cities, particularly New York.”
The site offers a ranking of data coverage and accuracy for particular counties. And Zillow will also collect user feedback.
The “Zestimate” is displayed on a chart that shows the home’s historical value changes over the last year, five years or 10 years. Consumers can compare their home’s value change against those in the surrounding ZIP code, city, county, state or the entire country.
Zillow users can choose their own list of comparable houses to show side by side with their home.
Homeowners can refine Zillow’s estimated value of their home based on changes or additions to the house. For example, a seller with a recently remodeled kitchen can refine the home’s value based on the change. In this way, consumers potentially could use the site’s tools to figure out whether a remodeling project would boost their home’s value, Barton said.
Zillow, which raised $32 million in funding before launch, will operate via an advertising model. The company will display Google AdSense ads alongside home data results and will sell banner ads on its site in two different positions. Advertisers can target their ads by ZIP code, with more target options opening up over time, according to Bohutinsky.
Barton and team have compared Zillow to a “Kelley Blue Book” for real estate. “Like a Kelley Blue Book, we’re not saying it’s an end-all be-all.” Bohutinsky said. “It’s not an appraisal – it’s just a starting point to enable people to become smarter about the buying and selling process.”
Providing home value estimates and data to consumers online isn’t a new concept; HouseValues, for instance, offers home sellers who register at its Web site a free estimate of their home’s market value, and many brokers and Realtors also offer a comparative market analysis to consumers visiting their sites. A new service from California-based HomeSmartReports.com is selling detailed property estimate reports directly to consumers for $24.95.
Zillow differs by not requiring site registration to gain free access and also by enabling users to alter their value reports based on changes to their home.
Barton in a January interview with Inman News said Zillow will not operate as a brokerage or agent, though he does expect real estate business models to change over time as consumers become more knowledgeable about the home sale process.
“Consumer behavior has begun to change… people are using the Internet to help them in the (home buying process),” he said. “I’ve found that in other industries behavior change leads the business model change.
“I’m not implying that we have some new commission model figured out, but it feels to us like … Realtor services are going to be unbundled a bit.”
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