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What's your home worth? Get a 'Zestimate'
| | Tuesday, March 14, 2006 @ 10:17 AM EST
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Contributed by: Ken Lyons
Ken Lyons Properties
Read more archived articles about Credit and Finance
New site promises sophisticated home valuations and -- one day -- an end to 6% commissions.
NEW YORK (MONEY) - Say "goodbye" to appraisers -- and possibly real estate agents. At least that's the promise of www.Zillow.com, launched Wednesday, which is headed by the founder of Internet travel company Expedia.
Zillow allows users to get a better estimate of what their house might fetch if sold, as well as others in their neighborhood and around the country.
Founder and CEO Richard Barton says new tools like the ones being offered by his company are going to make real estate agents less important, and quite possibly lower the fees homebuyers and sellers pay. "Realtors currently sit at the middle of the transaction," said Barton. "I think in the future they will sit more on the outside offering specific services."
Some observers agree. William Apgar, a senior scholar at Harvard's Joint Center of Housing Studies, says the fortitude of real estate agent's commission-based pricing structure, stuck at 6 percent, has baffled him and other economists for a while. But he says new tools like the ones being offered by Zillow should put downward pressure on the fees agents and other real estate professionals can charge.
"As information becomes more and more available the value of the specialized assistance realtors give goes down," said Apgar.
Barton has a history of making transactions cheaper for consumers. While working at Microsoft, Barton founded Expedia in the mid-1990s. The Web site played a lead role in slashing the costs to consumers of booking online reservations for hotels, cars and airplanes.
That has real estate brokers worried that Zillow will come directly after their commissions, possibly by offering some kind of Web service that will allow consumers to list their homes without a broker. For now, though, Zillow, unlike Expedia, is not providing anything you can actually buy. The centerpiece of the Web site is a free tool that guesses how much any given house is worth.
Plug in an address and you get a price.
You can even pull back to a satellite photo of a particular street, complete with price estimates for every house on the block. Those price guesses, which the branding-savvy Zillow folks call a "Zestimate," take into account the size of your home as well as past sales in your area. It also factors such general economic data as daily interest rates and housing prices in general.
The result is a Zestimate that changes daily. The site allows you to track your house price and others on a daily basis, like one would a stock. It even has historic price graphs, and can chart a house's price against other houses in your neighborhood, or the average price in a particular neighborhood versus houses elsewhere.
Zillow has price data for 60 million homes. More of those homes are on the West Coast, but Barton says his Web site is rapidly trying to add data on markets across the country. He says Zillow has a lot of data on houses in Boston, as well as many cities in Florida.
How accurate are Zillow's Zestimates? It's hard to say, but Apgar says the site's valuation tool is modeled on programs used by banks and realtors for years. "These tools are getting good," says Apgar. "But valuations are tricky. A particular house can have defects or improvements not factored into computer models."
For that reason, Zillow allows users to tweak their Zestimates by adding in the value of a new kitchen or a finished basement. "Web valuation tools have been tried before, " says Brad Inman, publisher of Inman News, which track real estate technology. "But the features Zillow offers are more robust because users can interact with the information like never before."
Still, Inman questions where sites like Zillow can replace human appraisals or the advice of a knowledgeable local real estate broker. "I don't think you would put the the number you get from a Web site right onto a For Sale sign," says Inman.
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