Zillow's Secret Plan

Zillow's Secret Plan

Most consumers think Zillow's website is designed to help them buy and sell homes. It's not.

BAD FOR BUYERS: Homebuyers don't realize that agents posted next to homes on Zillow's website are often clueless about those homes because they have never seen them. Buyers get inaccurate and/or incomplete info on homes they are interested in.

BAD FOR SELLERS: Because Zillow's website displays agents next to homes they know nothing about, sellers lose buyers and lose sales. Sellers also get hurt by inaccurate "Zestimate" valuations posted next to their asking price.... valuations that are often below the list price.

BAD FOR AGENTS: Zillow's website uses homes (provided by Realtors) to attract buyers so it can charge Realtors for access to customers that used to come to them directly for free (before Zillow existed). In other words, the real estate industry allowed Zillow to become an expensive middleman that charges big fees but provides little value.

In more detail, here's what you need to know about Zillow:

Let's start with "Instant Offers."

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Zillow recently introduced a program called "Instant Offers." It's being tested in Orlando and Las Vegas before rolling out nationally. Homeowners give Zillow info on their home to receive a quick cash offer. Sounds good, until you dig deeper.

The offers are from investors who buy homes low to sell them high. Sellers who accept investor's offers are required to pay an 8%-9% service fee, which does not include help from an attorney, appraiser, or real estate professional.

Zillow knows most sellers won't accept the investors' offers. The price is too low and the cost is too high. Unfortunately, the few sellers who do accept lose valuable equity.

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But Zillow doesn't care when sellers say no. It actually counts on it. Why? Zillow sells their contact info to real estate agents who pay Zillow for leads. Over 70% of Zillow's revenue comes from generating business for agents. So Instant Offers isn't really about helping people sell, it's about selling people.

Some might say, "Greg, this is technological evolution." Hogwash! There is nothing technological about luring people to a website with a product you know they won't like as a charade to capture and sell their info.

Instant Offers isn't Zillow's only harmful program.

Zillow's online home valuations ("Zestimates") mislead consumers every day. Zestimates are often inaccurate, sometimes wildly wrong. Even Spencer Rascoff, Zillow’s CEO, sold his home 40% below the Zestimate value. He offered a $1,000,000 reward to anyone who could solve the Zestimate problem.

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The problem is Zillow's well known brand bestows Zestimates with credibility. People presume Zillow has some magical algorithm to value homes. It doesn't. You shouldn't marry a man without meeting him and you can't value a home without seeing it.

Surprisingly, some banks rely on Zestimates. My sister is a retired police officer living on a pension in Cincinnati. Recently she sent me a text message, “Greg, I hate Zillow. Call me.” When I called she went ballistic, “Greg, my bank won’t renew my credit line because Zillow lowered my home’s value." Turns out the only way Linda's bank would keep the credit line in place is if she paid for an appraiser to dispute the Zestimate. She told them to take a hike.    

It gets worse: Zestimates can keep homes from selling and mislead buyers on what they should pay. Zillow posts Zestimate values close to the asking price of homes on its website. If the Zestimate value of your home is lower than the asking price of your home (this happens a lot), buyers are less likely to buy, and prone to pay less if they do.

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Why does Zillow offer home valuations it knows are misleading? They generate website traffic, which generates consumer leads, which generates revenue for Zillow. Remember, Zillow sells people. Zestimates are a lead generating CASH COW, albeit a sick one.


But MISLEADING ADS may be Zillow's most harmful practice.

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Zillow sells display ads positioning agents next to other agents' listings. The goal is to divert buyers away from listing agents to agents who pay Zillow for leads.

This is horribly detrimental to everyone (except agents who pay for the ads). Buyers are not well served because they talk with agents who don't know much about the homes they are interested in. Sellers are not well served because interested buyers talk with unknowledgeable agents who have a financial incentive to switch those buyers to their own listings.

I am trying to make this point: Zillow's business is not about helping people buy and sell real estate, it's about selling people to real estate agents. Homes are the attraction. People are the product.

So What is Zillow's Secret Plan?

Zillow is trying to become the Amazon of real estate with customers on its shelf. It wants to influence homebuyers and sellers to work with agents who pay Zillow, and make every Realtor in America dependent on Zillow.

Zillow is nothing more than a lead gen machine. It doesn't train agents. It doesn't vet agents for quality. It simply diverts homebuyers and sellers to agents for money.

In my opinion, Zillow is a high profile brand with no worthwhile purpose.

** URGENT MESSAGE TO REALTORS**

Zillow is on a path to making you, me, and every real estate firm in America dependent. It is laying the groundwork now. In my view, Zillow's motivation is to form a nationwide brokerage of salaried agents and use the website we empowered it to create, and leverage it against the rest of us.

Think it can't happen? That's what travel agents thought until Zillow's co-founder toasted them when he founded Expedia.

Zillow broke its promise to our industry and deserves to lose our support. I prove it in this Huffington Post article: REALTORS FIGHT BACK AGAINST ZILLOW

It's time to stop criticizing Zillow and start doing something about Zillow. We need to build an alternative to Zillow, a website that does what Zillow was supposed to do, help our clients sell homes.

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Want to play a role? Email me at greg@72SOLD.com. We are putting together a national #stopzillow leadership team

Amazon in real estate? Geek Wire reported that Amazon is setting up a real estate referral portal to direct customers to agents who pay Amazon for leads. I hope Amazon changes its mind. Using its brand to "endorse" agents it knows nothing about is beneath the Amazon image. I recorded this video on the subject: WHY AMAZON SHOULD STAY OUT OF REAL ESTATE

Redfin v Zillow? Redfin just filed for a $100 million IPO to launch RedfinNOW a competitor to Zillow's Instant Offers: CNBC, Redfin v Zillow. Imagine an industry controlled by Redfin and Zillow? We'd have to choose between a salaried job with Redfin or paying Zillow for leads. I'd rather sell cars.

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Zillow Can Be Beaten. It's a publicly traded company... and that's its weakness. When Zillow shareholders get wind that the industry providing most of Zillow's revenue is building a competitor to Zillow, they may move their money elsewhere.


WE BETTER WAKE UP

Will we wake up and pull our listings from Zillow? Will we stand up and form our own MLS if the NAR endorsed MLS's refuse to cut Zillow off? Probably not, because we're too fragmented, lacking the leadership NAR was supposed to provide.

I've been in real estate since I was a kid. My dad, Chubby, before me, going back into the 1940s.

Right now Chubby is crying, then screaming, if he's looking down observing what we've so casually and ineptly let happen.


Jacob David

Sell a Home, Buy a Home, Buy Land, Buy Farm & Ranch, Lease a Home

2y

Trulia, which was purchased by Zillow a few years back has the same issues. True Story: One of my buyers found this home on Trulia and insisted that he see it. It was not on Har.com So I went up to that home and knocked on their door. I told them that the home was listed on Trulia for sale. The lady told me that was a year back, now it's not for sale anymore. I conveyed this news to my client. How embarrassing for Trulia! I told my client to stop using Trulia and go on www.har.com for daily updated listings. So that was just one erroneous listing. I have found a few more after that. I even called Trulia's staff and told them about these errors. But being a whale of a machine, they could not do anything about it. Sad.

Jacob David

Sell a Home, Buy a Home, Buy Land, Buy Farm & Ranch, Lease a Home

2y

I am a Real Estate agent mainly serving South West Houston and nearby cities. Zillow's Zestimate is so wrong and misinform people. Their zestimate undervalues homes and does not take into account so many variants, in a zip code when pricing a home at fair market value. I believe many home owners are already angry and upset with Zillow. By undervaluing homes, it does not mean Sellers will sell at that price. Or is it Zillow's way of driving down market prices by posing to be an authority on Real Estate? What's the public perception of Zillow? I have stopped advertising on Zillow for the fact they herd me in with other agents. I don't like being packed in like a can of sardines. Zillow sells the same page to 5 or more agents, and it's a scramble for lead generation, that may work for a few agents. Mostly, I am displeased with Zillow and Trulia for the fact that they have a lot of erroneous, outdated listings, with wrong prices, and wrong data. www.homesinhoustontoday.com

Anthony Brown

CEO and Co-Founder Reignlist, Inc. A National Movement helping real estate agents create new commissions opportunities by showing them how to take back ownership and control of their listings.

2y

Great article. reignlist.com is a new real estate platform that solves all the problems agents, consumers and professionals have with site like Zillow. Learn everything you can and join the National Movement for agents to take back ownership and control of their listings that Zillow has take away. A National MLS available to agents and consumers Only listing agents info and office are featured on listings. Earn commission on any property you sell in your state, not just your local board A new game changing message technology that will be preferred by all 330 million Americans. Stop paying thousands for suspect leads. View a single lead & only purchase if you see value. No contracts And much, much more.

Pamela Rachil

Saving our country from debilitating debt one family at a time!

4y

Hey Greg, what's the latest on your plan to create a new, private "MLS"???  Is that still a work in progress?  Haven't heard anything from you in a while.  Also, your thoughts on the recent developments in the Anti-Trust lawsuit against NAR and the DOJ taking a hacksaw to the knees of Realtors nationwide?  Curious to hear your opinion on all this and if you think there will be a solution.  It's looking pretty bleak right now.

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Denise Humphrey

Licensed Realtor at OnDemand Realty

4y

Why is our board and our real estate commision not getting involved to stop this? We pay them yearly shouldn't they be doing something to protect the industry? maybe suing them would be the thing that needs to be done. There shouldn't be an option for agents to check in the MLS to display listings on Zillow, ect. When that option is gone agents will not be going out of their way to post to those sites. Brokers will not have control over that either. The information Zillow is putting out is wrong and misleading, this should be considered unfair practice so who's protecting us and the consumers? Isn't that what our commissions whole job is to do? Protect the consumer from redlining, steering, and overall unfair practice! Zillow IS breaking all the rules and getting away with it! why are they not being stopped? Does this mean anyone can open a real estate company now and break the rules set by the state? Shouldn't they be adding rules to the game as time changes with internet just like anything else?

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