Real estate agents: how will Zillow affect your business?
Something new is happening in the online real estate field… a new entry that will have far-reaching effects on your real estate business. At this time, it offers access to MLS, valuation services, etc. as an incentive for your website visitors to provide their name and email address so you can follow up with prospecting messages. Your website exists to attract buyers and sellers.
While access to the MLS will continue to be a strong incentive, in the future it is likely that most Internet users 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 buyers and sellers. And while they’re there, visitors are exposed to advertising from their competitors and (upcoming) affiliated real estate agent services. In other words, you will no longer have the first opportunity to capture potential customers.
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 visitors to the Website. On its first day of business, Zillow had so many visitors (over 300,000) that its site crashed. That “nice to have” problem has been fixed.
They offer three valuation tools for home buyers, sellers, and owners who just want to keep track of the value of their biggest asset. “Zestimate” is a tool that provides a rough estimate of value based on a proprietary statistical algorithm. It’s really just a starting point, though Zillow claims it’s 90 percent accurate. A Zestimate presents a range of values and a “Zindex” is the median value. Smart brand, huh? Zillow’s instructions urge users to use a Zindex over a period of time, say the last month, to arrive at a better valuation.
To refine the value estimate, Zillow offers a free tool called “My Zestimator.” It follows a logic familiar to any appraiser. First, users edit data about their household. They then choose the best options from a list of relevant comparable sales in their area. The Zestimator then calculates a refined value.
Zillow recognizes the difficulty of determining a home’s value based solely on numbers and the qualitative assessment of an untrained user. Once again, they strive for 90 percent accuracy, but admit that this goal is not always possible. Obviously, Zillow is not a substitute for a formal appraisal, nor can its results be used to obtain a loan.
Zillow is not easy to use properly. Site visitors should undergo basic training to understand how to get the best results. Basically, they get a crash course in evaluation principles and how to use Zillow’s tools. For those unfamiliar with evaluation techniques, there is a lot of room for error. For example, when I used the ballpark estimator, Zestimate, to value my condo, Zestimator included single-family residences as part of the value calculation. The satellite map also misidentified another property as mine. Zillow also appears to rely heavily on a statistical formula of dollar per square foot and an age factor. When I refined my search using My Zestimator, Zillow was unable to return any results even though several condo units within my complex had sold over the past year. So you still have some issues to work out.
How does Zillow expect to make a profit if it offers its services for free? A look at the website quickly answers that question. They will take advantage of a huge volume of traffic to generate revenue from pay-per-click advertising and programs like Google AdWords. Since your future prospects are likely to go to Zillow first, they’ll be in a strong position to pressure real estate professionals to place ads on their site: “Advertising on Zillow.com allows you to reach people who are actively seeking information about their current and future homes.
Zillow also offers a link program, but it’s strictly one way from your site to theirs. This will help quickly build your search engine rankings, but it does nothing for your site. You would be cautious about sending your visitors to Willow, where they will be exposed to competing advertising.
At the bottom of the home page, Zillow has a link for you to sign up for “upcoming programs for real estate professionals.” Have to! I suspect that they will soon offer (perhaps for a pay-per-click fee) the use of Zillow’s tools without your visitors appearing to leave your site. There may also be special advertising programs for real estate agents.
In the meantime, real estate agents should be prepared to answer valuation questions from buyers and sellers who have first visited Zillow’s site and have their own idea of a property’s value. You may find yourself in the position, for example, of having to explain why Zillow’s valuation missed the mark. The best way to become familiar with Zillow’s tools is to go through the appraisal process for some of your listings yourself.
Zillow’s entry into the real estate business requires real estate professionals to place more emphasis on providing website visitors with useful free information and value-added offers to win them over as customers. It also means that you should learn as much as you can about Zillow and investigate how you can use their site or services for your own benefit. Things are changing and this is your “warning”. Those who embrace change will prosper and stay one step ahead of their competitors. Those who don’t…
