28 Feb Zillow changes the real estate pricing game
Pricing real estate is a bit of a black art. Sellers want to get the most they can. Buyers want to offer a fair price without over-paying. Real estate brokers user a combination of market data, local knowledge, and gut instinct to attach to a house a price that is at least a fair basis for negotiation.
This whole dance is one that has avoided any semblance of automation, and it certainly has skirted the edges of consumer empowerment.
Zillow.com is changing that. Earlier this month, the company announced the beta of a Web site that generates unbiased valuations some 60 million homes in the U.S. That not only includes homes currently for sale, mind you, but the vast majority of residential real estate in the country, whether it’s on the market or not.
Valuations are based on an array of information, including past selling prices, market comps, inflation rates, tax databases, and the like. Additionally, the site’s Zestimate calculator helps homeowners hone in on the specific value of their home, based on improvements they’ve made to the property.
Zillow is one of those companies that “got away” as I was preparing the DEMO 2006 program. Originally invited to participate in the conference, the Zillow team declined in order to concentrate its efforts on bringing the beta site to completion.
The Zillow.com service is tremendously valuable and tremendously disruptive to the real estate market. It makes data – once the exclusive province of real estate professionals – freely available. Free access to this information resource, empowering in its own right, won’t eliminate the need for professional real estate brokers; there are plenty of details in the property transaction process that are better left to professionals. But good information may well serve to accelerate real estate negotiations, and perhaps even curb rapid inflation and deflation cycles in the real estate market.
Because Zillow includes value data for homes regardless of whether they are for sale, the service suggests a behavior once predicted by idealab’s Bill Gross. At a DEMO conference about six years ago, he outlined an idea for a real estate service that would let individuals make an offer on any house, anywhere. While Zillow doesn’t offer this sort of transaction model in its service, the data Zillow provides could certainly be used to present unsolicited offers on real property.
It also prompts another and more voyeuristic behavior: within hours of launching the beta, gossip site Valleywag was posting (irresponsibly, I believe) home addresses of some of the Valley’s wealthiest executives. No doubt most folks will check the current value of their own homes, then begin finding out the real estate portfolios of family, friends, co-workers and other objects of their envy or derision. And this suggests another, less generous, use of the site: determining the assets of individuals for a range of unfriendly purposes.
These may be the unintended consequences of what should be an empowering consumer service, and that makes Zillow an interesting company to watch.
Zillow was founded by two veterans of Expedia, Rich Barton and Lloyd Frink. The Seattle-based company is funded by Benchmark Capital and Technology Crossover Venture (TCV), as well as private investors.
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