“Zillow Talk: The New Rules of Real Estate”: Zillow Tries Too Hard, Tips Its Hand; the Future of Real Estate Isn’t Here Yet (But It’s Close)

Zillow Talk: The New Rules of Real Estate, by Spencer Rascoff and Stan Humphries

Reviewed by Craig Blackmon

This book by Zillow’s CEO and Chief Economist, respectively, is a wonderful advertisement for Zillow. It’s also a good book. It’s easy to read – really easy, clearly written to appeal to the broadest spectrum of readers – and very informative. It does a good job of illustrating the power of data and how it can be harnessed to make the most informed investment decision possible when buying a house.

But the book aims higher. It concludes with some stirring language about the power of data (don’t worry, this doesn’t require a Spoiler Alert): “Numbers don’t lie. And they won’t lead you astray. Indeed, they’ll help you find your way home.” (The same expression dominates the Zillow home page.)

Ah, home. The term is associated with so many wonderful things: family, laughter, love, shelter, protection, and on and on. “Home” is not just a place. It’s a very special place, a destination that is both more common and more unique than any other.

Is this book going to help you find your way to your home? Probably not. In fact, I hope not. Home requires more than a well-researched financial decision. Much more. Besides, any prediction of the future is just that, a prediction, and in the meantime life marches on. A good life needs a good home, regardless of the financial future.

With its focus on the trees and not the forest, the reader is left with a sense that it is much ado about nothing. The book relentlessly promotes the web site, implicitly and explicitly, from start to finish. You’re left wondering: Is that it? Has Zillow really changed real estate? The web site provides useful insight, sure. But it hardly upends real estate, an industry that continues to operate on a 19th Century model. Does Zillow show us the final, evolved real estate industry of the modern, technological, information age?  I mean, nobody uses a travel agent or a stock broker anymore….

The answer is revealed by a closer examination of Zillow and the people behind it. I believe Zillow is an ongoing project that will change dramatically as real estate evolves. And it will be instrumental in that evolution. But Zillow itself cannot lead the change. And in the meantime, it uses a business model that keeps it in business, biding its time until the eventual evolution.

This book is a “must read” for investors and real estate brokers, but not homeowners

In other words, folks who make a business out of real estate will benefit from reading this book. It does an excellent job of demonstrating how data – available via zillow.com, a constant underlying refrain  throughout the book – can be used to calculate a property’s current and future value. So if the primary and essentially sole reason for purchasing a house is to make money (or if you sell houses yourself), this is a great book. It’s loaded with a lot of great insight.

For example, did you know that proximity to Starbucks is a good indicator of better appreciation? (Chapter 4) Or that you should list your home between March Madness and the Masters if you want the best chance at the best price? (Chapter 12) Fascinating stuff and worth considering when you are investing hundreds of thousands of dollars. A slightly better percentage return, thanks to in-depth analysis of the available data, can lead to quite a bit more money.

But if you’re looking to buy a home, don’t bother with this book. It’s myopic focus on dollar values simply doesn’t foster a good decision when looking for a home. Should you take into account financial considerations? Of course. But the primary focus should be on finding the right home for you and your family. So, while good schools may be an indicator of future value (Chapter 6), that shouldn’t be the focus. Rather, look for good schools so that your kids get a good education. This is a home. Not just an investment.

Zillow Is Setting the Stage for the Future of Real Estate

In its current iteration, Zillow doesn’t really do  much in terms of bringing the real estate industry into the 21st Century. As the book makes clear, Zillow simply wants to attract as many visitors to its web site as possible. Why? Because Zillow makes money as a lead generator for today’s real estate brokers.

In other words, Zillow currently complements and feeds off of traditional real estate brokers. The more people who use the Zillow site, the more leads that Zillow generates, and thus the more money it makes. Zillow is built on web traffic, nothing more. And it doesn’t do anything to disrupt a long-standing traditional industry, because that industry is it’s target market.  Even though that same industry is ripe for disruption.

Which is weird. Because the guy who co-founded Zillow previously co-founded Expedia. The web site that put travel agents out of business. Rich Barton is a widely recognized and highly regarded “disrupter.” His motto is “power to the people.” He believes that the internet can empower consumers in new ways that lead to better and more efficient ways of doing things. According to Mr. Barton, his companies Zillow and Expedia have “created new opportunities for new professionals to make new businesses for themselves.”

Except that Zillow hasn’t. Not yet, anyway. It’s merely expanded existing opportunities (lead generation) for a long-standing professional industry that allows it to sustain it’s dominant market position. Nothing new there.

But what if Zillow is a work in progress? What if, in only the highest level strategic planning documents, there is a plan for Zillow 2.0? That would start to make some sense.

What the Future of Real Estate is Going to Look Like

Today, there are two ways to sell your home: FSBO, or using the traditional cooperative real estate broker system. Home sellers can market their properties via many different channels other than the local MLS. Including, of course, Zillow, which shows both “Make Me Move” and true “for sale by owner” listings. So an owner is empowered by the internet and can forego using the real estate broker system, which includes payment of a commission to a cooperating agent.

But what if the home seller wants the professional insight and counsel of a real estate broker? From advice on preparing the home to market, to staging, to keeping the seller informed and educated, a real estate broker provides substantial value. And the broker is a trained marketing professional who will efficiently and effectively utilize the full array of marketing channels available in the 21st Century: yard sign, flyer, and open houses and tours, of course; but also web sites and social media.

Today, that real estate broker can exist, thanks to Zillow. With its brand recognition and size, it is used by a large number of home buyers. A “listing” on Zillow can lead buyers to the home, without paying for other agents to bring them. So a home seller can sell for a fraction of the cost, as they will no longer need to pay the 3% buyer agent commission.

In other words, Zillow has positioned itself to be one of the successors to the multiple listing services maintained by cooperating real estate brokerages all over the country. And by positioning itself there, it provides the platform necessary for meaningful change in real estate. But until that change happens, Zillow will sustain itself (and its shareholders) by working within the existing system.


Buyers want a house; Sellers want a buyer

The National Association of Realtors held their Mid-Year conference this week. Often the Mid-Year Conference kicks up more dirt than the Annual event, as the Mid-Year conference focuses more on the business end and the mls issues (legislative sessions).  Less partying…more in depth issue discussions.

The big new issue is about Trulia and Zillow and the like. “Scraping” data vs. being spoon fed “appropriate” data. The big old issue is Dual Agency and what are “we” going to do about “it”.

The only news we must all and always be mindful of during these discussions is “we” are not the only ones in the “room”, and never will be.  Remember in the Bible when the Powers That Be of the time tried to trick Jesus into boiling everything He said in His whole life down to ONE major and single Rule?  Jesus didn’t skip a beat. If you don’t know what His one line answer was, well…go Google that. This is a Real Estate blog .

The one and only single rule of real estate, from which all other rules should follow is this: Buyers want a house at the lowest overall cost; Sellers want a buyer who gives them the highest net return.

Now take every mls rule, every State’s agency law, everything any broker wants and doesn’t want, everything any agent wants or doesn’t want, and hold it up against that one measurement…that one rule above all rules. Does what you want help buyers get their house at the lowest overall cost to them? Does what you want help sellers sell their house at the highest net return possible? If the answer is no…then change what you want.

The Big “New” Issue is about control of the mls data, control of the inventory, data scraping vs. direct feed via what insiders call IDX.  IDX is what you see when you search property on any agent site. Simple as that.

The sticky wicket for issue number one is that buyers want to see all the houses, including For Sale by Owner homes, preferably all on one site. That is why a Public MLS (kind of what Trulia and Zillow may turn into) serves the needs of buyers better than a private and Broker controlled site. That will continue to be true until and unless the Brokers fill the need of buyers (and to some extent sellers) by permitting listings that have no listing agent. Don’t hold your breath on that one.

The answer, as I see it, is two sources and not one.  One that has all listed property via any Brokerage site (as we all have access to all via IDX) and one that has all UN-listed property…and nothing else. Until then, buyer’s of homes will be confused into thinking that Zillow and Trulia and the like have all of the listed property PLUS…which it doesn’t. That means some portion of the public is always being mislead. Those that use only a brokerage site, and miss a choice For Sale By Owner property, and those that use Trulia or Zillow or Realtor.com, and miss a choice listed property. [One additional site for all rental property would be nice too. There’s a need someone should fill. But there never seems to be enough money generated by rental fees to support it actually happening.]

The Big “Old” Issue is Dual Agency. We already have that answer to some extent, it’s called Designated Agency. We simply need more time and practice and experience in the actual practice of Designated Agency…and that as they say is the SLOG of it. Until California adopts Designated Agency…there is no answer beyond the slog of it. When and IF California adopts Designated Agency, we’ll be able to make quicker progress.

Eradicating Dual Agency is not The NAR’s prerogative (Jim Duncan). Why? Look at The main rule of real estate according to ARDELL, characteristically in BOLD lettering in this post at paragraph four.

Sometimes and often, the buyer’s best way to get the house and/or get lowest overall cost, is by using the listing agent.  Not always, but sometimes and often. The State can’t…the NAR can’t…remove that option from the buying public. In reality what a buyer wants is full representation, from the person who knows the most about the house, and at the lowest possible cost which is free (or what they sometimes perceive to be free).

Sometimes and often, the seller’s best way to get a buyer to buy his house and get the highest net return is to cut out one of (or both of) the agents in the process.The State can’t…the NAR can’t…remove that option from the selling public In reality what a seller wants is ready access to all buyers in the marketplace without having to pay two agents, AND they want the buyer agent fee to come back to them vs. it being given to the buyer, if the buyer has no agent. They also don’t want to pay a buyer agent to tell the buyer that the house is overpriced or inadequate. They also want the agent they hire to be free to bring them a buyer direct (dual agency).

All of the answers with regard to Dual Agency are done with from the NAR’s perspective. They discourage agents from practicing it, until and unless it is absolutely necessary (when the buyer and seller want it). Each State has a long way to go on agency issues, like explaining “no agency” in it’s required agency disclosure noting it as an option. Until States stop asking for the real estate industry to approve and help with it’s agency options, “No Agency” will not appear as a fully explained option for their constituency.

Zillow widens gap on Trulia, traffic soars to 7.5 million visitors

Thanks to John Cook at TechFlash for the article (and picture)zillow-month.  I overheard Rich Barton talking to some friends a couple weeks ago at a TechFlash Launch Party talking about the record number of hits they were receiving.

I guess using Zillow today, was like watching the NASDAQ 8 years ago.

Zestimate vs. Sold Price

“Tsuru” over in Seattle Bubble comments, asked me for a comparison of Zillow Zestimates vs. Closed Sale Prices in the current market.  To be sure the Zestimate isn’t picking up the recent sale, I’m using the latest 50 or so sales recorded in the mls for King County in the last few days.  42 are single family homes and 8 are condos. I’m only showing the data for the single family homes, but thought you’d like to know the breakdown of the sales for the last few days.

I think I saw David G. at Zillow and someone from Cyberhomes going at it recently, so let’s throw Cyberhomes in the mix too.  As usual, I am posting this as the results come in…so I have no idea how it is going to turn out.  Let the best “man” win 🙂

Also of particular interest are the number of sales that are Short Sales and Bank Owned or other “stressed” sales, many, and very few of those indicated so in the Public view vs. Agent fields.

Sold Price Zestimate                Cyberhomes

$262,000 SS*                 $275,000                  $292,552

$365,000                         $301,500                   $398,192

$287,000 BO*                $311,900                   no result

$530,000 CO*                $743,000                  $695,991

$140,000 BO*                $186,957                    $196,698

$210,000  SS*                 $269,500                   $274,417

$282,500                           $320.000                  $281,461

$285,000                          $276,000                   $276,134

$347,500                           $334,000                  $347,910

$480,000                          $422,500                   $483,891

$550,000 ES*                  $705,500                 $688,842

$565,000 NC                      none                              none

$652,500                              ” N/A”                       $661,320

$190,000 BO                     “no result”                 $234,017

$269,950 SS*                    $285,400                  $282,102

$279,900                           $413,000                  $272,349

$517,000 BO                     $682,500                “$0-Foreclosure”

$450,000                           $454,500                 $518,982

$176,000 BO                     $312,500                 “0-Foreclosure”

$267,999 NC                           n/a                                     n/a

$740,000 SS*                   $937,000                $794,218

$325,000 CG                     $547,000               $567,171

$420,000                           $410,000                $402,384

$451,050 CR                     $637,000                $559,188

$850,000 NC                         n/a                               n/a

$835,000                           $802,500                $811,305

$915,000                            $831,500                $875,266

$850,000 NC                          n/a                              n/a

$370,000                           $367,000               $428,766

$636,500                            $702,000              $676,200

$650,000 SS *                   $707,500              $662,000

$360,000                            $347,500              $376,152

$475,000 BO*                   $584,157               $585,199

$292,500 NC                            n/a                              n/a

$305,000 NC                           n/a                              n/a

$309,950 NC                            n/a                              n/a

$373,000                            $342,000             $352,252

$386,000 NC                               n/a                         n/a

$389,950 NC                               n/a                          n/a

$400,000                            $391,000             $392,337

$577,000   TR                   $467,500             $405,413

$416,000                            $468,500              $484,506

*disclosed in Agent Remarks or owner field, but NOT in public remarks

SS = Short Sale. CO  = Corporate Owned, CR  = Corporate Relocation, BO  = Bank Owned, ES  = Estate Sale, NC = New Construction, CG  = Completely Gutted, TR = Totally Remodeled

Geographically, most of the short sales, all except one, are South.  The first sales are in Federal Way, Auburn, then Burien, Kent, South Seattle, over Mercer Island, Eastside, Bothell, North Seattle on the Green Lake/Greenwood side, then North Seattle up through Shoreline. That is how the mls code numbers run from 100 through 715.

Goodbye Yellow Brick Road

The yellow brick road heading into the Emerald City, has finally lost its shine and turned to stone this past week. If the combined dreariness of fall in the Northwest, Wamu’s funeral, and the Seahawks SLOOOOW start wasn’t enough for us to ask for Lexapro during our next doctor’s visit, the latest batch of bad news certainly is.

No sooner than the venture capitalists sound alarms bells and implore startup CEOs to save cash, slash costs, & stay alive, two of Seattle’s Real Estate 2.0 giants, Redfin & Zillow announce workforce reductions.

Zillow announced at 25% cut on Friday, while Redfin announced that it had laid off 20% of its employees last Monday. Granted, it wasn’t like things were much better in the Real Estate 1.0 world. My NWMLS database’s member table has about 3,000 fewer records than a back up from last year did. But it’s another sign that everybody expects a long & cold winter ahead.

If you were one of the few that got axed, I wish you luck finding your future life, beyond the yellow brick road.

Thanks for the great time, Zillow!

As one of the presenters put it, last night Zillow took a page from real estate agent’s marketing tools and conducted an “open house.”  A certain number of agents were invited to attend, some mortgage professionals, and there were even invites out to buyers and sellers that frequently are on the site. Part of the open house involved sessions where the attendees could learn more about how Zillow functions – one session for marketing and another for the more technical side of the site.  So, my business partner and I split up to cover as much ground as possible.

For me, the marketing session didn’t produce anything new.  But, I guess I hadn’t realized until being there what a “power user” me and my team are with their site. Somehow I thought that the invites had said that they would be introducing new features, but as far as I could tell it’s stuff that we have found and started using as each new feature was introduced.  Plus, we also had already figured out that syndication sites (like Point2, vFlyer) weren’t the best way to get an individual agent’s info maximized for SEO. Although we do still use syndication sites because the go out to a lot of other sites that we just don’t want to spend the cycles having to re-enter each listing over and over and over.  It is very time consuming.  Gotta love widgets, that’s for sure!

Speaking of technical stuff… I was interested to see the data that they gave about the various sites and the stats for user activity.  Part of what was shown here also filtered over into the conversation at the after-function with regard to Zindexes ( and how that is measured and it’s rate of accuracy.

Afterward there was a soiree down at the Waterfront Grill in their private function locale in the former Rippa’s space.  (I’m curious to know where those photos they had taken will end up…. no, nothing tawdry, just lots of PR stuff) Good times had by all and some great debate between agents and Zillow employees alike.  Thanks to David Gibbons, Drew, Mike, and Scott Huber for all of your discussions with us and for being wonderful hosts along with your other employees.  It was really great to meet all of you and we look forward to seeing what else is “up your sleeve.”

Zillow Launches On-Line Mortgage Rate Quotes

Earlier this month I wrote about Zillow stepping into the mortgage rate quote arena…well tonight’s the big night. They are scheduled to launch at 9 p.m. PST. I’m honored to have been included as one the mortgage professionals to review their product and it will be interesting to see how it develops.

Zillow is not creating a mortgage company; they are attempting to create an online tool consumers can use to shop lenders. Once I get past my first objection of rate shopping, here are some of the two features I like the most:

The consumers privacy is protected while shopping–the Loan Originator will not see their names and they do not provide their social security number. This is unlike other online rate-comparison tools where a consumers private information is resold to calling centers all over the world.

Consumers will have the ability to shop lenders by rate, cost and the Loan Originator’s Zillow reputation. Zillow has a rating system from 1 (bad) to 5 (great) that consumers can use to grade the LO. So let’s say LO Sally has an incredible rate and low costs but she’s rated a 1 vs. LO Joe who has a competitive rate and cost with a 5 rating: the consumer can make a choice between the two (or however many LO’s have submitted a rate quote). The consumer will be able to review the LOs lined up in an easy to read column format with this information easily viewed.

My only real concern, as I’ve voiced many times is that shopping for rate will not always land you the correct mortgage. The wrong mortgage with what appears to be a low rate/payment may be a very expensive mistake. Especially in this volatile market where mortgage rates can change 3-5 times per day. Any rate quote may be invalid the moment it’s sent to the consumer if the rate is not locked…this is true with Good Faith Estimates as well. Speaking of GFE’s, Zillow Mortgage quotes are not the same as a GFE–I do recommend that consumers who are seriously considering working with any of the Loan Originators participating on Zillow Mortgage obtain a Good Faith Estimate with the Federal Truth in Lending.

I’ll still stick to my guns and say that referrals from the people you trust and respect are the best way to select a Mortgage Professional…however for those of you that have a need to shop rates on line, Zillow’s mortgage tool could be the ticket.

I Dig Dueling Digs

Zillow, which seems to produce new features almost daily, has birthed something totally unique. As a member of Zillow’s board of directors, I usually get previews into what’s coming through the pipeline, but with this release, I hadn’t seen too many of the details.

Dueling Digs is like nothing I’ve ever seen on a real estate site. It’s pretty simple, really: You are presented with two photos, and click on the picture that you like better. After ten “duels,

Have you heard about Zilpy? New site for tracking rents in cities across USA…

A title rep sent me an email today that gave me a head’s up on a new site I’d not seen before called www.Zilpy.com. It looks a heck of a lot like Zillow but with data on rents instead of home values. I’ve been playing around with it a bit and while I can’t figure out exactly yet how they’re getting the data, I’m intrigued. Most likely I’ll make mention of it to some of our investors to get their feedback on it as well and see if they think it’s a worthwhile site.

Check out the function of “heat maps” for rent levels in Washington. More states and cities are covered so it’s not just a Seattle gig. I believe it’s come to life from Silicon Valley.


Catching Z-Z-Z's Zillow on Mortgage

No…Zillow with mortgage is NOT boring…quite from it. I’m just a bit worn out after the historic day we’ve all gone through in the mortgage industry today and I’m ready to call it a night. However, just when I’m going to unplug my laptop…Zillow finally provides the public with some more clues on how Zillow will integrate mortgages on their site.

I’m lucky to have been included as one of the Mortgage Professionals getting a scoop before the release. And this has all ready been covered very well at Lenderama, Blown Mortgage and Bloodhound Blog to name a few. What I like the most about this concept (which not all the details have been revealed) is the fact that Zillow is doing background checks by an independent third party before they will accept a Loan Originator to be a part of this feature.

From Zillow’s blog:

While we’re not sharing more details right now, we can say that we’ve built our product around Zillow’s model of openness and transparency that is increasingly important in today’s home lending environment. And, consistent with our information-based model, we have no intention of being part of the transaction. After speaking extensively to both consumers and mortgage professionals about the product, we’re confident that all parties will ultimately benefit from Zillow’s unique approach to home lending that is unlike any other in the market today.

This is the phase for interested loan originators to apply. More zetails to follow…time for me to catch my real z-z-z-z’s.