Something new is happening in the online real estate arena… a new entry that will have far-reaching effects on your real estate business. Right now, you offer MLS access, valuation services, etc. as an enticement to get visitors to your Website to provide their name and email address so that you can follow-up with prospecting messages. Your Website exists to capture buyers and sellers.
While access to the MLS will remain a strong enticement, in the future it is likely that most Internet surfers will first visit a new site, “Zillow,” to get an idea of property values. Zillow offers a free “do-it-yourself” comparable valuation report for both buyers and sellers. And while they are there, visitors are exposed to advertising by your competitors and (upcoming) services from affiliated Realtors. In other words, you will no longer have first shot at capturing prospective clients.
Zillow has a database of 60 million homes, based on property values, sales and other public records. They intend to increase that to 110 records. Access to this information is free for Website visitors. On their first day of business, Zillow had so many visitors (300,000+) that their site crashed. That “nice to have” problem has been corrected.
They offer three valuation tools for buyers, sellers and home owners who just want to track the value of their largest asset. “Zestimate” is a tool that provides a rough estimate of value based on a statistical proprietary algorithm. It is really just a starting point, although Zillow claims ninety percent accuracy. A Zestimate presents a range of values and a “Zindex” is the median value. Clever branding, eh? Zillow instructions urge users to use a Zindex over a period of time, say the last month or so, to arrive at a better valuation.
To refine the value estimate, Zillow offers a free tool called “My Zestimator.” It follows logic familiar to any appraiser. First, users edit facts about their home. Then they pick the best choices from a list of relevant comparable sales in their locale. The Zestimator then computes a refined value.
Zillow recognizes the difficulty in coming up with a home value based solely on figures and the qualitative assessment of an untrained user. Again they strive for ninety percent accuracy, but admit that this goal is not always possible. Obviously, Zillow does not replace a formal appraisal, nor can its results be used to obtain a loan.
Zillow is not easy to use correctly. Visitors to the site must undergo some basic training to understand how to get best results. Basically, they receive a crash course in appraisal principles and how to use the Zillow tools. For those unfamiliar with appraisal techniques, there is plenty of room for error. For example, when I used the rough estimator, Zestimate, to value my condo, Zestimator included single family residences as part of the value calculation. The satellite map also erroneously identified another property as mine. Zillow also appears to be relying heavily on a statistical dollar per square foot formula and an aging factor. When I refined my search by using My Zestimator, Zillow was unable to come up with any results even though several condo units within my complex have sold within the past year. So, it still has some kinks to work out.
How does Zillow expect to turn a profit if they offer their services for free? A look at the Website quickly answers that question. They will leverage a huge traffic volume to generate revenues from pay-per-click advertising and programs like Google AdWords. Since it is likely that your future prospects will first go to Zillow, they will be in a strong position to push real estate professionals to place ads on their site: “Advertising on Zillow.com allows you to reach people who are actively looking for information about their current and future homes.”
Zillow also offers a link program, but it is strictly one-way from your site to theirs. This will help to quickly build their search engine ranking, but does nothing for your site. I would be cautious about sending your visitors to Willow where they will be exposed to advertising by competitors.
At the bottom of the Home page, Zillow has a link for you to sign up for “forthcoming programs for real estate professionals.” Do it! I suspect they will soon offer (perhaps for a pay-per-click fee) use of Zillow tools without your visitors seeming to leave your site. There may also be special advertising programs for Realtors.
Meanwhile, Realtors should be prepared to respond to valuation questions from buyers and sellers who have first been to the Zillow site and have their own idea of a property’s worth. You may find yourself in the position, for example, of having to explain why Zillow’s valuation missed the mark. The best way to familiarize yourself with Zillow’s tools is to go through their valuation process yourself for some of your listings.
The entree of Zillow into the real estate business requires that real estate professionals place more emphasis on offering Website visitors useful free information and value-added offers in order to win them as clients. It also means that you should be learning everything you can about Zillow and investigating how you can leverage their site or services to your own benefit. Things are changing out there and this is your “heads up.” Those that embrace change will prosper and stay a step ahead of their competitors. Those that don’t…