(This is Part 1 of a two-part series. See Part 2.)
A hurricane the magnitude of Katrina has just hit the real estate industry. Did you notice?
Since its recent launch, the real estate industry has been buzzing about a new Web site called Zillow.com. According to Alexa.com, an Amazon Web site that ranks Web traffic, Zillow has rocketed to the top 200 Web sites in the world. That’s higher than Realtor.com or any other real estate Web site.
How did Zillow zoom to the top in real estate Web traffic? First, Zillow’s founders identified what the consumer wants when they visit a real estate Web site — access to listings and to comparable sales data. Second, Zillow’s CEO was the founder of Expedia. This well-funded team understands Web marketing. Third, the real estate community has been shaking in its boots — would Zillow be the next frontal assault on the full-service model? Would Zillow lead to more commission compression? These questions have had brokers and agents alike flocking to the Zillow Web site to see how this new business model will influence their business.
If Zillow is successful, Realtors will have to redefine their value proposition. Ever since inception, Multiple Listing Services have provided important sales documentation that was not available to the general public. Zillow provides not only comparable sales data, market statistics that show whether prices in a given area are increasing or decreasing, but it also provides its Zestimate of how much a given property is worth. The market data is particularly useful information for Realtors to know because it can assist them in helping sellers to set accurate list prices. It can also assist buyers in identifying how much they should pay. Where Zillow faces major challenges, however, is providing accurate values for its “Zestimates.”
Zillow’s success ultimately will rest with how well its algorithms evaluate comparable sales data and then supply an accurate sales price. The problem with Zillow’s model is that there are several other companies doing a better job of supplying accurate comparable sales data. Sadly, virtually no one seems to have noticed.
Over the last six months, several new companies have entered the realm of providing comparable sales information on the Web. The first entry into this foray was Trulia.com. Trulia’s goal is to become the Google for the real estate industry by working with brokers directly. This so-called “vertical” search engine will direct visitors to specific agent sites based upon the user’s search. In other words, rather than using the general Google search engine that generates lists of nursing homes, for example, when you search “homes for sale,” Trulia will direct its users directly to agent sites that match the client’s search request. This increases the accuracy of the search. According to Greg Sterling, an analyst with the Kelsey Group, this produces a better-qualified lead as compared to leads generated by Google, MSN or Yahoo. The Trulia search engine provides comparable sales, links to listings, as well as a mapping feature. As Trulia works with more brokers, their data will become increasingly accurate. Since they launched in July, their beta search engine contains a fair amount of data from California and New York, but is still unavailable in many places throughout the country.
Information on comparable sales is now available to the public through a company with its roots in providing comparable sale information for the appraisal industry. The former president of Dataquick, Mike Ela, has launched HomeSmartReports.com, which provides accurate appraisal data on a seller’s home for $24.95. This detailed report not only helps sellers estimate their prices, it also includes information on the foreclosure rate, appreciation, as well as the high and low sales for the area. For $6.95, buyers can obtain information on comparable sales data on any home they are considering purchasing. With this report they also receive the assessed value of the property, the property tax amount, a report on foreclosure activity, sales volume, and a host of other information. The site also provides a mapping feature that plans the best route to show up to six properties.
For the last six months, I’ve been hearing commercials for a company called Moveup.com. They provide comparable sales data for your personal property at no charge in states where comparable sales data is public record. (The “non-disclosure states” where this service is not available include Idaho, Indiana, Iowa, Kansas, Missouri, Montana, New Mexico, Texas, Utah and Wyoming.) When you visit the Moveup Web site, you’ll be asked for your name, property address and e-mail address. The search engine cross checks the public records to determine whether your name matches as being the recorded owner of the property address where you are searching. If these match, they send you all the comparable sales for your neighborhood. Unlike Zillow, which sent me comparable sales data that did not match the properties I was searching, the information for Moveup.com was spot on. Every comparable sale was appropriate to the property I was investigating.
Will Zillow really make a difference in our business? Will they still be in business three years from now? What challenges does this new model pose? To learn more, see next week’s article, “The Problem with Zillow.”
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