Something new is happening in the online real estate field … 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 incentive for your website visitors to provide their name and email address so that you can keep track of prospecting messages. Your website exists to capture buyers and sellers.
While access to the MLS will continue to be a huge draw, in the future it is likely that most netizens will first visit a new site, “Zillow,” to get an idea of property values. Zillow offers a free do-it-yourself comparable valuation report to both buyers and sellers. And while they are there, visitors are exposed to advertising from your competitors and the (upcoming) services of affiliated real estate agents. In other words, you will no longer have your first opportunity to capture leads.
Zillow has a database of 60 million households, 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 its first day of activity, 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 buyers, sellers, and homeowners who just want to track the value of their largest asset. “Zestimate” is a tool that provides a rough estimate of the value based on a proprietary statistical algorithm. It’s really just a starting point, although Zillow claims to be ninety 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 for a period of time, say the last month or so, to arrive at a better rating.
To refine the value estimate, Zillow offers a free tool called “My Zestimator”. Follow a logic familiar to any appraiser. First, users edit data about their home. 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 finding a home value based solely on numbers 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 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 must undergo basic training to understand how to get the best results. Basically, they take a crash course on assessment principles and how to use Zillow tools. For those unfamiliar with evaluation techniques, there is a lot 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 misidentified another property as mine. Zillow also appears to rely heavily on a statistical dollar-per-square-foot formula and an aging factor. When I refined my search using My Zestimator, Zillow was unable to return any results despite the fact that several condo units within my complex have been sold within the last year. So you still have some problems to solve.
How does Zillow expect to make a profit if they offer their services for free? A glance at the website quickly answers that question. They will leverage a huge volume of traffic to generate revenue from pay-per-click advertising and programs like Google AdWords. Since your future leads are likely to go to Zillow first, they will be in a strong position to drive real estate professionals to place ads on your 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 linking program, but it is strictly one-way from your site to theirs. This will help build your search engine rankings quickly, but it does nothing for your site. You would be cautious when sending your visitors to Willow, where they will be exposed to competitive advertising.
At the bottom of the home page, Zillow has a link for you to sign up for “Upcoming Programs for Real Estate Professionals.” Should! I suspect they will soon be offering (perhaps for a pay-per-click fee) the use of Zillow tools without their visitors appearing to leave their 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 visited the Zillow site for the first time 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 assessment missed the mark. The best way to familiarize yourself with the Zillow tools is to go through the valuation process for some of your listings yourself.
Zillow’s entry into the real estate business requires real estate professionals to put more emphasis on offering website visitors useful free information and value-added offers to win them over as customers. It also means that you should learn all you can about Zillow and research how you can leverage their site or services to your advantage. Things are changing and this is your “warning”. Those who embrace the change will prosper and stay one step ahead of their competitors. Those who don’t …
