You know how Zillow is the go-to search engine for all things real estate? Well, do you ever wonder how this digital powerhouse is impacting the real estate market? The value of your home? Even the long-term career outlook and job security for real estate agents? 

I mean, if everyone everywhere is looking at Zillow, then what does that mean for literally any and every other real estate app, real estate website, real estate company and real estate agent? Is Zillow’s iBuyer model rendering the real estate agent irrelevant? In this current technological age, it’s a question worth paying attention to… After all, attention is the name of the game when it comes to modern digital marketing, and we all know… whatever the eye follows is where you’ll find people watching… and wherever the people are is where all the data lives. So by definition and extension, is Zillow actually LESS about featuring homes and MORE about data mining?

We are going to discuss all this and more today and I have a caller who wants to know if they should sell their home based on what Zillow says its worth.

THAT, my friends, is what we are covering today, so stay right here for Real Talk with Big Red.

Well, good day, good day, good day and happy Spring Market 2021 to all of you fans and followers, buyers and sellers, ladies and gentlemen. I can just feel the shift in the weather and the general vibe in the air, so I’m delighted to be here with you to record our FIFTH episode of Real Talk with Big Red. I can hardly believe it’s already been five months since we first launched this podcast. We’ve enjoyed so many great conversations and tackled a lot of questions surrounding real estate and the real estate market… and to think we are just getting started. We have a full year on deck already slated with incredibly knowledgeable and successful guests and thought-provoking topics for all of 2021 and today is certainly no different.

Today we are discussing… [dun, dun, dun] Zillow. 

What does everyone think about Zillow? I know my sister in law texts me her Zesstimate practically weekly. She thinks it’s the end all, be all of home valuation.

My buyers are always texting me listings that come from Zillow, even after they are set up for automatic property alerts through my listing website. It’s as if Zillow has completely won the attention game.

So for all you buyers and sellers out there, this begs the question…. If you have Zillow, do you even need a real estate agent? And for all of us agents out there, we can’t help but wonder... can we even compete with Zillow? Is this one of those age-old scenarios where we have to accept if we can’t beat ‘em, we have to join ‘em?

1.) What is Zillow?

Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help.

Zillow is a business who sees itself as transforming the real estate transaction into a place where buyers and sellers can move from one home to the next as easily as possible. Their business model started at the top of the funnel as a lead generation model and over time, end to end transaction platform that is seamless, bundled and creates happiness and ease around the home buying and selling experience.

2.)  How does Zillow make money?

Today from selling products to real estate agents, specifically leads and now it sells transaction management services and showing services. Zillow is celebrating 15 years in the real estate space. They have their own broker license and the use of that license has changed, necessitating additional licenses over time such as ibuyer and referrals and IDX feeds, which pulls listings from the various multiple listing services across the country. The information it offers on its site for consumers now mirrors the information that agents have at their fingertips. Any general brokerage is on the same playing field in terms of access to listing data. 

Zillow has innovated in its drive to aggregate. From it’s purchase of Trulia, Market Leader, Showing TIme, DotLoop…. Zillow’s innovation is its vision, its drive to control not only the lead, but also the transaction, and end to end seamless transaction and, ultimately, the gateway to the contract.

Showing Time is the app that we real estate agents use to set up appointments to get your home shown… and ultimately sold. What does that mean for you the consumer? It gives Zillow another opportunity to consume data and control data. Think about it. You list your home and it has 20 showings on the first day. Zillow knows this. All the agent feedback is recorded within the Showing Time app so if the people feel it’s overpriced, outdated, all that data now belongs to Zillow. Acquisition likely includes past data, information on all listings, 50 showings, feedback, not only the opportunity to see where houses are in demand, what the consumers and agents think about the pricing of the inventory, what needs to happen to get an offer.

Huge data grab. Very smart purchase by Zillow. Collecting and controlling data, document management system, terms of service, insight into the whole transaction.

Zillow isn’t just a platform either, it’s also a brokerage. That makes Zillow a buyer, a seller, a lender, a data provider and a data forecaster and now a data collector of how homes are being shown.

How does Zillow impact real estate agents?

Zillow has always made a great partner to the real estate agent. So why do agents suddenly feel uncomfortable now? Zillow is being mandated by consumers to provide a digital experience. They believe they are in lock-step with what consumers want and have a partnering model with agents and create a win-win relationship by honoring those relationships. So buyers and sellers are the customers and agents are their partners.

As agents we need to educate ourselves and our clients. How Zillow works affects them and their bottom line. Our goal is always for our buyers and sellers to profit. So the bottom line is to understand how big Zillow is in this industry, to take our data and extrapolate it, use the algorithm to purchase and sell properties for themselves.

Honorable, firm in their belief that what they do is good for the real estate industry and view themselves as providing value to consumers and agents.

So where does all the angst come from? 

The tension between Zillow and real estate agents goes back many years. Realtors have long complained about Zillow’s inaccurate Zestimates, valuing homes with online data and algorithms, with no physical walk-through or neighborhood assessment. Realtors say it is impossible to accurately value a home without a physical inspection so Zestimates mislead homeowners into pricing their homes incorrectly — losing equity in the process.

Realtors also objected when Zillow sold agents “positions” on its website next to listed homes. This redirects some buyer inquiries away from listing agents to agents who pay Zillow. Realtors say this damages their sellers because buyers get information from agents who have never seen the home.

The real estate market exploded in 2020. With some sellers reluctant to list due to uncertainty surrounding the economy and the pandemic, inventory was shorter than usual, causing prices to appreciate rapidly and buyers to scramble. One in five homes sold above list price as homes came off the market at the fastest rate in over two years.

To add more fuel to the fire, the Federal interest rate was decreased to record lows in response to COVID-19, causing the mortgage industry to refinance at record highs and buyers to take advantage of the rates while they could.

Urban metro areas across the nation experienced an “exodus” of sorts with massive numbers of people fleeing cities for the suburbs.

Figures are based on information from sources like comparable sales and public data. Zestimates are only as accurate as the data behind them, meaning they may be outdated or incorrect.

Each company has an estimate of their own accuracy: Redfin claims their estimates for active homes on the market have a current median error rate of just 1.77%, and off-market homes are within 6.64%. accurate. Zillow claims its estimates have an error of not greater than 7.9% on any home. However, they recently dropped a bombshell, claiming their median error rate will be dropping to 4% or below very soon. Given that they don’t break out their error rate per on- and off-market properties, an overall 4% rate on 110 million homes could very well put them in the lead.

Why the difference?

• Zillow doesn’t provide different accuracy metrics for on-market vs. off-market homes like Redfin does. That means their margin of error has to be higher so it can account for actively listed homes as well as properties that haven’t been sold in years.
• Because of the smaller number of listings available, Redfin can look at more details than Zillow. For example, Redfin may consider that a home with a stunning view may have a better value, and Zillow may not take this little tidbit into consideration at all.
• Zillow provides estimates for more homes than Redfin does. The more homes the system looks at, the more difficult it is for the pricing algorithm to calculate all the detailed variables that impact value in different parts of the country. For example, in some parts of the country, a home without a basement is no big deal. In other locations, a basement is a must-have and not having one will negatively impact the home’s value.

Zillow’s accuracy is dependent on many factors including the data the system has on any given property. Redfin’s accuracy is based on an algorithm that takes into account hundreds of data points. Both platforms are relatively accurate, but as with most things, the more information you have, the better. Using both tools, in addition to the advice of a professional like an appraiser, is your best bet.

It’s also worth mentioning that my website, denisepetti.com offers home valuation.

Zillow Statistics: https://expandedramblings.com/index.php/zillow-statistics/

• 2020: 245 million monthly unique users.
• 2019: 196 million monthly unique users.
• 2018: 157.2 million monthly unique users.
• 2017: 151.6 million monthly unique users.
• 2016: 140.1 million monthly unique users.
• 2015: $123.6 million monthly unique users.
• 2014: $76.7 million monthly unique users.

SHOW NOTES

Links mentioned on this episode:

https://expandedramblings.com/index.php/zillow-statistics/

https://www.homebay.com/tips/which-home-value-estimator-is-better-redfin-or-zillow/