Zillow Stirs Internet Revolution in Home Valuation

How much is your home worth and how does it compare to other nearby homes?

To answer these questions, you could hire an appraiser or a real estate agent. But those options cost money. And what if you’re just curious and not ready to put your home on the market? Or what if you want to know about a home for sale you’ve always had your eye on but it isn’t on (or doesn’t appear to be on) the market? What would it take to get the owner to sell?

Enter the Internet. Specifically Zillow.com.

Zillow.com is a relatively new, exciting Internet tool that uses a variety of factors to estimate home values. It’s free, informative, dynamic — and addictive.

Since it launched in early 2006, Zillow, which is the brainchild of two former Microsoft executives (Richard Barton and Lloyd Frink — the same pair that devised the successful travel site Expedia), has built up a database of more than 70 million homes. Initially a repository of government-supplied information, Zillow has added interactive elements and maps that quickly tell users what homes are for sale, what a seller would require to “make me move” and what homes have recently sold in a particular geographic area, overlayed on a Google-style, bird’s-eye-view map.

From the comfort of your laptop, you can check the value of every home in your neighborhood in a few minutes. You can also check the home values of both friends and enemies, including the guy who still owes you money and claims he lives in a shack. (I know you’re living in a $500,000 house, so pay up!)

Other features of the Zillow site include graphs of home values over time (similar to a stock’s value chart) and a comparison of a particular home’s value to all homes locally and statewide. Users can also get information about comparable homes in a specific neighborhood.

But Zillow also offers the ability to interact. For example, if you check out your own home on Zillow, you could correct information about it on the site. (They didn’t know about the recent addition that added value to your home, but you can add it. But be careful, because the county tax assessor can also access Zillow.) In addition, Zillow offers what it calls a Valuation Heat Map, updated daily, which reveals information about pricing trends that you can fine-tune to your state, city and even your neighborhood.

Zillow has essentially taken the kind of information that traditionally was reserved for real estate professionals and made it available and accessible to consumers. All for free. The site relies on advertising revenue and other partnerships for its revenue.

According to Fortune magazine, Zillow had just a 2.3 percent share of existing real estate web sites earlier this year, ranking it fifth overall behind Realtor.com, Realtytrac.com, HomeGain.com and ReMax.com, but Zillow’s numbers continue to rise and cut into its competitors’ share.

In the past, the best way for someone in the market to buy a home was to hire a real estate agent who presumably knew about homes for sale and recent sales in the target neighborhood, but with Zillow, anyone with a computer can do the research for free and discover not only what sold recently, but what is on the market and what the asking price is. They can then use Zillow’s tools to compare prices and determine the best deal. For now, most Zillow users are arming themselves with the extra information before they hire a real estate agent, making them more educated and astute buyers or sellers.

Zillow’s popularity has created some trepidation in the real estate industry, often criticized for its insular nature and unfriendliness to consumers and unwillingness to publicize information. If everyone knows what a real estate agent knows, why hire a real estate agent, some worry.

Sellers can also benefit from Zillow’s model. If I want to sell my home, I can list it for a “make me move” price, which may be higher than market or even unrealistic, but you never know. If the market value of my home is $350,000 and I list it for $450,000 to “make me move,” I just might get a bite from someone who is willing to pay the premium. It’s almost like being able to knock on the door of a home you desire and say I’ll pay you $450,000 even though you don’t have a For Sale sign in your yard.

For now, Zillow is busy attracting real estate agents as advertisers because all but the savviest of consumers still need help in buying a new home. “If you have a good agent, they’ll know about the barking dogs (homes for sale),” Frink told Fortune magazine. “If we can get the agents to share that kind of information with the public and they get a benefit from it, they’ll get more clients and gain more trust.”

Of course, Zillow’s estimates (Zestimates) are just that: estimates. In ever-changing markets, Zillow estimates can be off by 10 percent or more. But for consumers who had few other options prior to Zillow, its tools can be informative, helpful and money-saving. 

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