Zillow and Changes to the Real Estate Industry

Real estate site Zillow.com launched last week. Some are predicting that Zillow.com is going to hurt realtors.

But wipe away those tears, realtors. Zillow.com is not going to have as big a negative impact on realtors as predicted.

Zillow.com is a website where you can go to find an instant online valuation of over 60 million homes in the United States.

The founder of Zillow.com is Richard Barton, who also founded Expedia.com a decade ago. A Los Angeles Times story suggests that Zillow may result in reducing realtor commissions, in much the same way Expedia reduced travel agent commissions.

However, I do not see Zillow.com having nearly as dramatic an impact as sites like Expedia had on the travel industry. First of all, the airlines themselves were responsible for a lot of the travel agents’ decline, when they kept cutting and eventually eliminated commissions to travel agents. Second, buying an airline ticket or booking a rental car or hotel, is more or less a commodity purchase. Technology could easily take the place of handling the purchase.

The real estate industry is different in several respects. One of the biggest differences is that realtors typically represent the seller — and most sellers need realtors.

When you want to sell your home, you need someone working for you to sell it. That’s the real value of realtors — their capability to attract willing buyers and put them in front of the average homeowner seller. Pulling together comparable sales and pegging an appropriate valuation is but one aspect of the marketing.

The average homeowner looking to sell does not know how to begin attracting buyers. Even many of those who try the “for sale by owner” packages on the market today, eventually end up listing the house with an agent (at least they do in my neighborhood).

Why? Unless you live in a handful of superhot markets, it is just too hard to sell a house on your own. There is a lot of work involved that homeowners either do not know how to do, or else they do not have the time to do.

Also, the real estate market still operates in favor of realtors. Your property needs to be listed in the Multiple Listing service, and realtors control that. And unless there is a sufficient commission to split between two realtors, you can’t really expect other realtors to refer “their” buyers to your home — there is nothing in it for them. Zillow does not change either of these two conditions.

Zillow.com may have an impact on the real estate industry — but it will be a mixed bag for consumers. If anything, it may have the effect of dampening home prices somewhat by arming the buyer with more negotiating power to dicker for lower prices. But take the place of the realtor who is actively marketing the home? I don’t think so.

I also tend to agree with the good Professor Cornwall that the Zillows of the world give rise to startups and entrepreneurial businesses in totally new categories. So in the end Zillow may lead the industry in some new and positive directions.

Tags: Business; small business


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

13 Reactions
  1. Your post is well taken and I also don’t think Zillow.com is going to do to the real estate industry what they think they did to the travel industry. But your statement that a property needs to be listed in the Multiple Listing service, and realtors control it, should be evaluated. The local realtors don’t control the local MLS! It’s controlled by the local MLS and the rules set forth by NAR (National Association of Realtors), pretty soon it’s going to be controlled by DOJ (Department of Justice). If Zillow.com is an advertising site, why did it join an MLS in California? Just read this articles from RealtyTimes.com.

    Is Your MLS Helping Put You Out Of Business?

    Everybody is trying to get into the real estate business one way or another, all they need to do is tie into a broker and off they go creating leads for themselves or they peddle the leads for a fee to local realtors. Anyway, the saga goes on…

  2. Hi Jan,

    Thanks for your comments.

    When I say the realtors control entry into the MLS, I am speaking from the perspective of the average consumer. I was not alluding to any battles as between local realtors and the NAR or any other entity. Because the average consumer still feels as if he/she needs a realtor to get into the MLS. Realtors can get you into the MLS — that’s all I meant by “control.”

    Also, I am familiar with the legal challenges to MLS going on, and I even originally had a paragraph in here describing them. But I eliminated it for the sake of length, and because it made the main point confusing.

    My main point was — and still is — that the average homeowner needs a realtor in order to sell real estate today. Sure you have do-it-yourselfers and FSBO options — just like you have do-it-yourselfers for lots of other things in life. But not everybody chooses to go the do-it-yourself route, especially when selling real estate. Most people simply don’t know how or don’t have the time to properly market their homes.


  3. Zillow no doubt is looking to join MLS’s because their data that they provide the consumer is flawed. As I point out in my blog at http://houseblogger.typepad.com/houseblogger/2006/02/on_zillowcom.html
    Zillow is implying that their evaluations are giving accurate evaluations. But that is impossible as long as they use public records. The only accurate sales records are held by the Realtors MLS.

    As small Businees we can all be impressed by Zillow’s Marketing campaign rather than their poor results in a pretty package.

  4. Hi Tim,

    Thanks for your comment. Yes, it sure sounds like someone is working overtime on the marketing end, at zillow.com. But it’s hardly the category killer that some suggest.


  5. if you aren’t happey with the Zillow “zestimates” i would recommend trying http://www.HomePriceMaps.com because unlike zillow HomePriceMaps.com integrates how much a home sold for (pulling public records etc) with Google maps.

  6. I think nothing special will happen this time on the contrary to the Expedia when it became the ultimate source. In real estate business “human factor” is of vital importance.

  7. Thanks, Anon. I wrote the author a note.

    I don’t mind my words being quoted — IF the author also acknowledges that they were my words. And IF the author also links back to this article so that my words can be seen in full context.

    But that author did not acknowledge copying half of my article.

    UPDATE: It turned out to be an oversight by the author, and she immediately fixed it when called to her attention. Thanks, Arina.

  8. I think that flat fee mls is the biggest thing to happen to real estate. Owners becoming realtors in a sense. Online making it happen.

    Zillow and the zestimate was a great idea but not the biggest thing in real estate.

    One word. Foreclosure.

  9. Aloha Anita
    What a turn of events from back then – none of us seen this coming. I know our MLS has a meeting with them next month about getting direct feeds now that they own half the real estate world and listhub is pulling the umbilical cord . We will see how the near future will change things