Zillow, the perennial surprise-maker of online real estate, has just launched its long-anticipated foray into the mortgage world with a “Mortgage Marketplace.”  The company’s original online real estate product — the controversial “Zestimate” — is a computer algorithm estimating the value of homes.  The logical mechanism behind a “Mortgage Marketplace” would thus also be a computer algorithm — say, a mortgage pricing engine that spits out rates from lenders based on the borrower’s situation.

In a delicious twist of irony, however, the mechanical Turk behind this new product is … a person.  As in, homo sapien.  Specifically, a mortgage professional.

In a pre-launch briefing with “What would David Gibbons do” David Gibbons, he described the all-too-typical grief that a potential borrower goes through with many lenders, whether online or offline:  bait-and-switch salesmanship, hidden fees, inflated rates, and perhaps most egregiously, a complete lack of anonymity.

Zillow’s solution?  Let consumers ask for mortgage quotes without revealing their name.  Let mortgage brokers respond to these requests.  Let consumers sift through the responses and choose the broker they want to work with; then and only then does the buyer have to reveal his or her name.

What about the whole bait-and-switch thing?  Zillow deals with that in a very Web 2.0 way — consumer reviews of mortgage broker performance.  Plus, the participating mortgage brokers are vetted — at least minimally — to confirm that they are, in fact, licensed mortgage brokers.

And here’s something sure to make at least some mortgage brokers sweat a bit:  the competing mortgage offers are visible not just to the consumer who requested them…but also to the other mortgage brokers who submitted offers!

The cost to mortgage brokers?  Zero.  In David’s words, Zillow remains committed to being an advertising platform.  The data they can now gather about consumers — what their home is worth, other homes they’re interested in, and now their income and credit score — makes it possible to target-advertise with nearly pinpoint precision.  David assures us this is not being done in a “Big Brother” kind of way, but if I understand him correctly it may soon be possible, for instance, for Mercedes to target ads that will appear only in front of prospective buyers with an income of at least $100K and a credit score of at least 720.

Other commentary:

• Todd Carpenter likes it.
• Tribute Media reviews the product.
• Further explanation from Rich Barton, Zillow CEO.
• Drew Meyers weighs in.
• Greg Swann notes that this product reduces the information asymmetry in the mortgage lending business, and sheds further light on how Zillow manages the wealth of personal information they’re able to gather about consumers.
• Joel Burslem has some questions, but is submitting a loan request as we speak.

Tags: Consumer, Industry, Mortgage, Zillow

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Embargoed for release until 9:00pm (hence the 9:01pm time stamp!) is the news that Zillow has just released their Q4 2007 analysis. It ain’t pretty.

Giant swathes of the country are bathed in the bright red color of price decreases and upside-down homeowners…here, for instance, is the national map of homes with negative equity. The bubblistas are gonna love this one!

Here’s how to interpret that map: 50% or more of the homes bought in 2007 in, say, Modesto are now worth less than what the owner still owes on the property. Sounds pretty grim, and it certainly is if you’re one of those homeowners…especially since we Californians have taken it as our God-given right to have property appreciate steadily year on year.

Here’s a map I’d like to see: the percent of homes bought in 2005, 2004, 2003…pretty much any year going back which are now “under water.” Instead of bloody red color so much loved by the bubblistas, we’d see a map bathed from sea to shining sea — including even the fabled fruited plains themselves — would be painted a joyful bright green, the color signifying “0% to 10%.” In fact, the map would have to be modified to show the precise number 0%.

Moral of that story: I feel your pain, trust me. If you bought a home in 2007 in Modesto, and life circumstances force you to sell it in 2008…your life sucks. Absolutely. But what about those who can stick it out for 2, 3, perhaps 5 years that this market will remain sucky for much of the country? Life for them won’t suck. Absolutely.

Let’s examine San Mateo County. Zillow’s “Z-index” for the whole county shows a 5.5% drop — that’s right, a drop — quarter on quarter. Translation: If in 2007 Q3 you bought a hypothethical home that covered the entire county, that home’s value dropped by 5.5% by Q4 of 2007.

Sounds grim, right? Again, let’s look at the whole story…

Here’s a city-by-city heat map of price appreciation from Q4 2006 to Q4 2007 … and in this map, red is good (at least for homeowners; for perma-renters and bubblistas it gives heartburn.)

Interpretation:

Huge swathes of San Jose, the East Bay and further inland, plus some pockets of the Peninsula — like East Palo Alto and South San Francisco and Redwood City — are down, in some cases dramatically. Most of the Peninsula, however, saw price increases from 2006 to 2007; in particular, the marquee towns of Palo Alto, Menlo Park, Atherton, Cupertino, Los Gatos, and Saratoga saw prices go up 10% or more.

Folks, it’s a mixed message out there: a lot of the country is in pain. But just remember this, as always: Real estate is local, local, local. Just because prices in Vegas haven’t fallen doesn’t mean you should sell your particular home and live in a tent. You need to look at the price trends in your neighborhood.

Oh, and the “multiple offers” mentioned in the title? Here’s a small sampling of what the rumor mill says has happened in the last week…

• Saratoga — $1.8M - ish –> 15-20 offers (two incidents)
• San Carlos — $850K - ish –> Two properties sold with a combined 13 offers. (Hat tip to Arn Cenedella, a Menlo Park Realtor, for providing that particular juicy piece of gossip.)

Tags: Atherton, Consumer, Cupertino, East Palo Alto, Industry, Los Gatos, Menlo Park, Palo Alto, Redwood City, San Carlos, Saratoga, South San Francisco, Zillow

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A while back Joel Burslem — author of FutureOfRealEstateMarketing.com — joined Inman.

Today we hear that Rudy of Sellsius has joined Trulia.

Other (still unconfirmed) transitions we hear are in the works:

• Redfin buys Bloodhound Realty and its associated blog, and Greg Swann becomes Redfin’s Arizona broker-of-record.  Redfin CEO Kelman, distressed at Swann’s self-proclaimed disinterest in national parks, sends him off to Yosemite to distribute Redfin stickers, with strict instructions to send back Latin-only postcards.   Russell Shaw, sick of the traditional broker model, is seen handing out the Book of Kelman on street corners in Phoenix.
• Overwhelmed by her increased workload, Redfin media maven Cynthia Pang brings aboard uber-consultant Marc Davison — at Greg Swann’s recommendation.  Marc and Greg are spotted writing press releases in Haiku.
• Rudy’s long-time business partner Joe Ferrara joins Zillow as its “Chief Zestimate Accuracy And Opt-Out Evangelist.”
• Brad Inman, founder of Inman News, having successfully convinced the real estate industry to adopt electronic signatures, heads to the Middle East to replace Tony Blair as peace envoy.
• Athol Kay gets hired by Kodak.  His new job?  Do nothing, absolutely nothing.  In particular, PLEASE DON’T POST ALL THOSE BAD PICTURES!!! It makes our industry look bad.

• Marlow Harris, burnt out with real estate, moves to Memphis, TN, and becomes a Graceland docent.
  
  
• Daniel Rothamel moves to Masai Mara, Kenya and becomes a safari guide.  On weekends, he heads into Nairobi to coach and ref basketball games.
• Dustin Luther, missing the corporate life, moves back to Move.com.
• Brian Brady gets an emergency call from Washington.  “Bernanke quits.  We need you.  P.S. Leave the suspenders in San Diego.”

Tags: Humor, Industry, Inman, Redfin, Sellsius, Trulia, Zillow

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Trulia! Zillow! … and now Roost! Where do they come up with these names?

Roost, a new startup in the increasingly crowded real estate search space, launched last week to a cacophony of commentary from the re.net. Joel Burslem covered its feature set, its performance, and noted that Roost has the complete MLS inventory because it gets its listings from MLS’s, albeit indirectly. Greg Swann fawned over its business model and complete inventory.

If I understand Roost’s business model correctly, it intends to make money in a way that’s clever, unique, and possibly illegal non-MLS-compliant.  [1/30/08 update:  I've been thinking about my choice of words, and "illegal" is definitely not the word I should have used.  "Illegal" is mugging somebody, or stealing something.  What Roost is doing is 100% legal and above-board.  It may -- and I emphasize may -- be viewed by some as being non-MLS-compliant.]

The unique aspect of its business plan: it offers brokerages the opportunity to sponsor search results and get the resulting click-throughs to their own site. A search in Sacramento, for instance, reveals that the current sponsor is Sacramento heavyweight Lyon Real Estate.

The first three listings I see are from VM Group, Gold Financial Services, and Prudential CA Realty, all clearly identified in compliance with Sacramento’s Metrolist MLS services.

Here’s the tricky bit…if you want more information, you click on “View Details on Featured Broker’s Site.” When you do that for, say, the Prudential listing, you get information about the Prudential listing on the Lyon Real Estate site:

This sleight-of-hand is accomplished through a too-clever-by-half url manipulation, much to subtle to be noticed by the average consumer, but apparently kosher enough to pass muster from the Sacramento MLS — at least for now. What if Prudential gets upset that the click-through on one of their listings on a public MLS-ish site goes through to one of its competitors?

Here’s how (I believe) Roost and Lyon defend themselves: Look at the url. When you search in Sacramento, you’re not actually using the Roost site at all; you’re actually using the Lyon site (GoLyon.com). For as long as Lyon is the sponsoring broker, the search is being conducted at golyon.roost.com — a (sub)domain under the control of Lyon Real Estate — and hence in compliance with those silly old arcane MLS rules.

Watch what happens when you go back to the site. In my case, I ran another search, and this one was sponsored by Intero. Same results, same look and feel, but the search is now running at InteroRealEstateIDX.com…and sure enough, the click-through goes to Intero’s own site.

Very, very clever. I really like this part of their business model, for reasons I’ve explained before: The current real estate business model heavily favors the listing side of the equation, and I’ve been clamoring to the likes of Zillow and Trulia to think about buy-side advertising offerings. If I’m a small brokerage in Sacramento, and I currently only have, say, 5 listings, I could decide to spend, say, $5000 sponsoring X number of real estate searches in that market. The number one bait that still seems to draw eyeballs in real estate is listings, listings, listings, and if I don’t have many of my own, why not leverage those of my competitors?

Now for the questions of MLS legality compliance …without going into all the details, I tried something like this trick about 2 years ago. It involved subtle manipulation of a url so that searches on a heavily-trafficked site were done — technically — using a url that was under my control. A good lawyer could easily have argued that this was in strict compliance with all the MLS rules. No dice. Within hours I got slapped down — not just by the MLS, but by my own broker!

I certainly wish Roost all the best, but I’m afraid they’d better put a sign on their front door that says, “Couriers please deliver cease and desist letters here.” Any business model that requires MLS compliance involves by definition an order of magnitude more headache. Why do you think Trulia and Zillow decided to get their listing feeds straight from the brokers?

Further commentary:

• TechCrunch, predictably, gets a few facts wrong. It’s not clear they understand the difference between a broker (e.g. Redfin) and a listings site (e.g. Roost.) Also, if I understand this bit of fine print on Roost’s site, they don’t get their data directly from the MLS, but by piggybacking on broker IDX sites. Subtle but important difference.
• Dustin notes that piggybacking off IDX feeds is a great way to scale your listings database quickly, but it puts some pretty onerous restrictions on what you can do with the data.
• Michael Price explains the url sleight-of-hand.
• Jay Thompson notes that, once again, the business model is about brokers providing listings, then paying for traffic.
• Sellsius praises Roost’s comprehensive and accurate results.

And still more commentary:

• Brian Boero* notes the irony that Roost is built on fairly antiquated technology — IDX — but provides a pretty rich user experience.

* At the last Inman, Brian and I finally answered that great conundrum: Did his ancestors add on “o” or did mine drop an “o” at Ellis Island? The answer: neither. His ancestors are Italian, and mine Dutch. So no, we’re not related — except of course, through Lucy.

Tags: Alternative business models, Industry, MLS, Real estate, Roost, Trulia, Zillow

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The Zillovians have been busy lately…first, singing a Zillow-fied Christmas carol…then, more substantively, releasing their new Smart Search technology, which, if I understand correctly, presents different information intelligently, based on where and at what zoom level you’re searching.

At the San Mateo county level, for instance, I get this:

At the city level, this is what I get for Menlo Park:

If I want more info on Menlo Park, I learn that local residents

• are well-educated
• are often multi-lingual
• are likely immigrants
• spend more money on housing compared to others
• ride their bikes to work

With the exception of the latter, it seems spot on.

Nice new features, but nothing earth-shattering.

What I’d really like to see from Zillow is something I’ve talked about before: addressing the advertising needs of buy-side Realtors. The Sellsius twins have weighed in on this issue as well.

Here’s what I have in mind: The advertising emphasis in real estate has always been on the listing side. If a home is for sale, that represents more than just an upcoming commission check for the listing agent: done correctly, it’s also marketing collateral. It’s an excuse to send out more branding postcards, to take out an ad in the paper, to hold open houses, to put out a sign…all things designed more to enhance the branding of the agent than to necessarily sell the home in question.

If the fact that I am selling a home or I just finished listing and selling my client’s home is good marketing collateral, why not make something of I just helped my clients buy a home?

We do a bit of this in the industry already: witness the occasional “represented buyer” newspaper ad — which is often just space filler around the more prominent “just sold” ads.

Zillow has a perfect opportunity here. While most of the online real estate conversation is about homes currently on the market, Zillow’s repository of all homes is perfect for telling a broader story, one which includes the buyer’s agent.

Hey Zillow — in your next product release, make it possible for the buy-side agent to tout their recent transactions too!

Tags: Advertising, Industry, Menlo Park, Real estate, Technology, Zillow

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The ongoing Active Rain vs. Move.com dustup, our very own ongoing soap opera saga, illustrates one fact above all else: the re.net is maturing. As the traditional players in real estate (finally) begin to appreciate the potential of emerging technology in real estate, it’s inevitable that more acquisitions will take place — hopefully successfully.

Move.com’s overtures to Active Rain were actually not the first in which a traditional player courted one of the new ones. That honor, I believe, rests with our very own Joel Burslem of FOREM, which was acquired by Inman a number of months ago.

Some other possible pairings? Google must be looking with interest at both Zillow and Trulia. Inman, Ris Media, and other real estate industry news sources may be eyeing some re.net blogs.

And who knows…maybe the Bloodhound will make a play for one of the other Phoenix re.net blogs? Or perhaps these guys might be interested in this one?

Tags: Active Rain, FutureOfRealEstateMarketing.com, Google, Industry, Inman, Joel Burslem, Move.com, Trulia, Zillow

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Market slowdown? What market slowdown? Despite much of the country’s real estate market being in trouble, despite the sub-prime mortgage mess, despite all the gloom and doom in the press, despite speculation that even almighty Google may be affected by the downturn, funding for Seattle-area startups continues strong.

Zillow just landed $30M in funding, bringing its total to just under $90M and suggesting a market value of some $350M. Zillow CFO Spencer Rascoff, quoted in the same article over at the Kelsey Group blog, says that now the market is down,

It’s less fun to Zillow yourself and your neighbors and friends. [But] we’re getting less voyeuristic traffic and more buyer and seller traffic.

Meanwhile, TechCrunch reports that Docusign, my personal favorite e-signature provider, just raised $12.4M. Docusign’s exposure to the real estate downturn is, of course, significantly lower than Zillow’s, since Docusign services numerous industries beyond real estate.

Dave McClure, a “Silicon Valley software developer, entrepreneur, startup advisor, angel investor, and internet marketing nerd“, notes that VC’s and tech attorneys are still stuck in the 80’s, faxing documents back and forth, rather than putting things online and using digital signatures. Hmmm…sounds like the real estate industry!

Tags: Docusign, Electronic signatures, Industry, Zillow

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With due apologies to my civilian readers, my content over the next few days will be heavy on the geeky-technology-side of real estate — you know, with the Inman conference starting tomorrow and all.

Tonight’s back-to-back pre-conference events were sponsored by Zillow and Trulia at bars only a few blocks apart.  T-shirts, free alcohol, and bloggers were all in abundance.

Personal highlights included…

1) meeting The Incomparable Kris Berg (her new official title)…here pictured with Dan Green.  Despite her travails during the long trip here all the way from San Diego, she appeared in good spirits.

 

 

 

 

 

 

 

2) Connecting again with David G from Zillow, complete with a t-shirt that read “I’m DavidG from Zillow.  Who the hell are you?”  Here he is shown with special agent Therese Swan of Alain Pinel Realtors.

 

 

 

 

 

 

 

3) Scoring a t-shirt from Trulia, here modeled by none other than CEO Pete Flint.  First the front (”Find me on Trulia Voices”), then the back (”because I’m too old for Myspace.”)  A rumor was circulating that earlier versions of this t-shirt had the punchline “because I’m not creepy enough for Myspace.”

 

 

 

 

 

 

 

 

 

 4) Getting a look at the fabled Sellsius blog mobile, fresh from a cross country trip:

5) Meeting the Sellsius twins again…Joe here pictured with Ardell Dellaloggia and Dan Green…and then with Mark Lesswing from NAR.  (Mark graciously forgave me for asking some tough questions during his presentation a few months ago at an Opes Advisors-sponsored event.)

 

 

 

 

 

 

 

 

 

6) Talking with Mike Simonsen of Altos Research (my blogfather), Joel Burslem (Inman and Future of Real Estate Marketing.com), and Scott Sambucci, also of Altos Research.

7) Comedic highlight of the evening was this somewhat futilely-posted sign, missing perhaps at least a zero, judging by the size of the crowd.

 

Tags: Inman, Mark Lesswing, NAR, Pete Flint, Trulia, Zillow

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I wanted to have a compelling title for a little experiment I recently did with my listing at 206 Palmita Place in Downtown Mountain View. It’s a newer construction home and I thought the location and price would appeal to couples or small families. Based on that demographic, I assumed more people would be searching for homes online, so I built a custom website for the house, and posted links to it on a number of real estate websites in addition to the ones like mlslistings.com that link to data on the MLS.

I also followed conventional wisdom and ran ads in the Palo Alto Weekly and Mountain View Voice newspapers, and an entry in the Open Homes Section of the San Jose Mercury News.

I then did some informal polling at the various open houses, asking visitors where they found out about the open house, leaving it as an open ended question. I also tracked hits to the website and looked at who the referring domains were. I found the results interesting and surprising.

Where did they come from?

Over the course of 4 days of open houses (Thurs and Fri evenings, Sat and Sun afternoons) we had 135 groups of visitors through. Of these, only 2 said they came based on the ad in the MV Voice, 1 from the Palo Alto Weekly and 1 from the SJ Merc. Another 11 groups had seen the open house directional signs (I blanketed the neighborhood) or the For Sale sign in the yard as they were passing by. That’s 14 out of 135 groups, or about 11%. The other 89% of visitors either found the listing online or were referred by their agents.

Online sources

I also tracked where hits to the website came from. There were over 2200 hits to the website, and initially 70% of those came from Movoto which is an online real estate information / referral site. After the first two days, mlslistings.com caught up, and after the first week was the source of about 70% of the hits. The house went under contract after a week, so I stopped tracking then.

While I admit that I am biased, I have had a theory for a while that newspaper ads for listings, especially in Palo Alto and surrounding communities, are more for advertising the agent and getting him or her more clients than getting potential Buyers into your home.

The National Association of Realtors estimates that 74% of home buyers begin their search for a home online, and the estimate for Silicon Valley is 92%. I’m still running an ad for my new listing in Redwood City, but it is only 1/4 page and that is because the sellers believe that potential buyers read the paper. I am also flooding the internet with placements and links, and I’m trying an experiment by posting the home on Zillow as well. It’s another experiment, and I’m partially doing it to get under Kevin’s skin as Zillow is a hot-button for him.

I’m tracking the marketing response on the Redwood City house as well, and I’ll do a post on the results from that when it goes under contract. In the meantime, I welcome your comments and hope for a bit of banter on online vs. print marketing.

Thanks for reading.

Tags: 94041, Advertising, Alternative business models, bay-area-real-estate, Business of real estate, California Association of Realtors, Demographics, Fun with Zillow, Home buying, Home selling, Keller Williams, Movoto, Online-real-estate-advertising, Real estate, Real-estate-advertising, Redwood City, San Jose Mercury, Technology, Zillow

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Michael Wurzer, the author of the well-written, provocative, up-and-coming FlexMLS blog, offers an MLS software provider's perspective on the recent Zillow developments, which from his point of view are yawn-inducing. Given that he first heard the news in the middle of the night after having been woken up by a puppy, he's probably grateful.

Michael raises the following challenge: Now is the time for brokers, agents, and MLS organizations to realize and increase the value of the MLS data repository.

I couldn't agree more. The unfortunate thing is…it simply ain't gonna happen. Why?  There are many reasons, not the least of which is organizational:  Realtor and MLS boards are designed with certain goals in mind, none of which have anything to do with technological innovation.

That's not necessarily a bad thing, mind you, since excelling in technological innovation is not a prerequisite for excelling in the real raison d’être for Realtor and MLS boards, namely fostering cooperation amongst otherwise fiercely competing brokerages and Realtors.  It really is coopetition in its purest form.

Think about it.  In our local market, the three biggest brokerages are Alain Pinel, Coldwell Banker, and Intero Real Estate.  The rivalry between these three companies, and between their respective agents, is fierce and unrelenting.  A new listing for Alain Pinel often takes place at the expense of the other two, since anybody interviewing multiple agents is likely to pick one from each company.  And yet, despite this intense competition, agents from any company — not just the big three — regularly and gladly show all the listings on the market, without regard to the listing broker.  Similarly, listing agents regularly and gladly listen to all the offers that other agents bring in, no matter which brokerage they come from.

It really is quite impressive, and the structures behind this are the much-maligned Realtor and MLS boards.  They create and enforce rules that enhance cooperation amongst competitors.  They have arbitration committees for settling disputes.  They have codes of conduct that prohibit poaching another Realtor's clients.  They require all members to upload new listings within 48 hours.

The big price they pay for enabling this coopetition, however, is that these boards tend to be consensus-driven (or nearly so), slow-moving, plodding, and methodical.  While this is the only way to get sworn business enemies to agree on anything, it's a terrible way of fostering  innovation.

Want to put sold listings up on the MLS?  Hell, no!  If one key player puts his foot down, perhaps threatening to remove his listings from the MLS, then that ain't gonna happen.

Let's talk about uploading the listings to Trulia, Google, or Zillow?  Absolutely not!  (Unless you're the Houston MLS.)  All it takes is one big broker to feel threatened by this move and it simply won't happen until there's absolutely no choice.

Ok, then, let's discuss creating a snazzy state-wide MLS to compete with these interlopers!  Sure, we'll discuss it, but what we really mean is "let's set up a feasibility steering committee to investigate this and report back to the board in the Spring of 2009."

Zillow and the other 2.0 players have no such restrictions.  Quite the opposite:  they're designed to turn on a dime, to be responsive to competitive pressures, to be creative, to be laser-beam focussed on consumers.  That's why they're so good at constantly turning out great products:  they're designed from the ground up to do precisely that.

Think of the Realtor and MLS boards as being akin to your local PTA.  The PTA is set up to do  extremely well at certain things:  raising money for a school, getting parents to volunteer in the classrooms, fostering interaction between parents and teachers.

But would you choose a PTA-type organizational structure to field a team of world-class baseball players?  No way!  To do that, you'd need to be much more business-oriented.  You'd have to be willing to take chances, to fire players that weren't doing well, and to be a hard-nosed negotiator.  That's now how PTA's are set up.

The next time you get frustrated at our industry's seeming inability to respond to these competitive threats, remember that that's simply the price we pay for having an organizational structure that otherwise suits our needs quite well.  Your local Realtor or MLS board ain't gonna be beating Zillow or Trulia at the technology game any time soon.

Tags: Alain Pinel Realtors, Coldwell Banker, Intero Real Estate, Real estate, Trulia, Zillow

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