- An automated computer-based estimation of a property’s worth can’t, by definition, be as accurate as that of a real estate professional, largely because the computer has no way (at least yet) of adjusting for non-numeric characteristics such as views, condition, type of carpeting, visual appeal, amenities, and so forth. That Zillow’s data is drawn from notoriously inaccurate county records doesn’t help their cause any.
- The public has been duped into believing that Zillow’s “Zestimates” are gospel truth. (What part of “Zestimate” says “gospel truth”?), making it harder for professionals to convince clients of true value. An extreme, perhaps apocryphal, example, reported here, was when a seller apparently pulled his home off the market when a potential buyer showed him a Zestimate $500,000 lower than his asking price.
The ever-erudite, passionate, and insightful Greg Swann has some hard-hitting commentary on both these points.
While both concerns are entirely valid, there’s a completely separate, equally important, issue: how come it’s outsiders like Zillow, and not real estate industry players, who are coming up with creative ways of monetizing the value of the mountain of data we’re sitting on? Borrowing from the old gold-rush days, “Thar’s gold in them thar data” — and the prospectors are largely outsiders!
The Expedia travel-agent-industry-destroying pedigree of Zillow’s founders naturally leads to fears of a similar revolution in real estate, so it’s no wonder we’re all worked up about it. For reasons best left to a post of its own, that ain’t gonna happen: disintermediating a low-dollar-value, relatively-frequently-purchased, non-emotional product like airline tickets is a whole lot easier than doing the same with a high-dollar-value, infrequently-purchased, highly-emotional product like real estate. Don’t worry guys, they’ll always need us!
Expedia’s success in the air ticket industry had a lot to do with it understanding — long before the airlines themselves — that while the airline industry’s primary product was getting people from point A to point B more or less intact, it was sitting on a largely untapped ancillary asset: the data about getting people from point A to point B. Expedia took that data, made it accessible to the unwashed masses, and left the airlines dutifully losing money while it took $X profit per transaction. Pretty neat.
Fast forward a decade…Zillow sees a similar opportunity in real estate. We all get that the primary product in this industry is enabling buyers and sellers to achieve their housing dreams. What we’re missing is the immense value in our untapped ancillary asset — MLS data. Realtor.com and/or local MLS boards could have and should have come up with Zillow a long time ago! We have the data, it’s higher quality than Zillow’s county records source, and we’re more familiar with it.
The real genius of Zillow is not its perceived threat of contributing to the downfall of this industry, but rather in doing an end-run around all of us and making money out of the gold mine of data that we’ve been sitting on.
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