The Helpful Pointer

On February 8, 2006, the real estate business changed a bit with the launch of
Zillow ™ (http://www.zillow.com). Zillow’s goal is to simplify the process of
finding the market value of a home.

Zillow is the creation of Richard Barton and Lloyd Frink. You may have heard of
Richard’s last project, founding the internet travel site Expedia.

In his launch press release, Barton says, “We believe you shouldn’t need a computer
science degree or a real estate license to find out what a home is worth. That’s why
we created Zestimate values, providing free and instant valuations for millions of
homes in America. This beta is just the beginning… Zillow will continue adding tools
and services to empower consumers to make smarter real estate decisions.”

With Zillow, 60 seconds is all is takes for anyone to find the current market value of
any home in the Zillow database - whether or not it is on sale (currently they have
data for about 60 million homes). Zillow computes its valuations based largely on
publicly available data (tax records, etc.), which leads to some pretty interesting
results.

In some cases, Zillow’s estimates seem to be accurate within the 10% margin of
error they list on their site. Many of the tests we ran and have read about, however,
show Zillow is regularly off the mark by as much as a few hundred thousand dollars.
A lot of properties don’t even show up, my house included.

Regardless of the accuracy of the data (which we assume will improve the longer
Zillow stays in business), the idea of Zillow is angering many real estate
professionals who feel that publicly accessible information like this puts the success
of their business in the cross hairs.

Good technology is disruptive, meaning it interrupts the status quo and forces us to
change (hopefully for the better) or get left behind. Whenever a new technology like
Zillow comes along, you can view it in one of two ways: optimistically or
pessimistically.

Let’s choose the former.

So how can you use Zillow to your advantage?

Start using their biggest asset (pricing information) to boost YOUR biggest asset
(the VALUE you deliver to buyers and sellers).

Zillow concentrates on price and makes that pricing information readily available to
anyone. And while price is important, it is only one part of buying and selling real
estate.

Fortunately, your business is not built on information alone. What good is
information without the knowledge required to interpret that information and turn it
into action?

I could go out and buy the entire curriculum used by the top medical school in the
country, but having the information doesn’t help me DO anything. Knowledge and
experience are required to turn that information into real VALUE for me and others.

It’s kind of the same thing for Zillow. Your goal is to make sure your potential
buyers and sellers understand that.

So here’s just one way to make Zillow work for you:

If you study the Zillow results carefully for properties you know well, you will find
that it is particularly poor in keeping up with major improvements made to
properties that substantially increase their value. This is just ONE of the holes that
exists right now.

Next time you are heading to a listing presentation, take the Zillow results with you.
Study the report and use it to your advantage to show the seller just how much
value you bring to the table. Use the Zillow Zestimate (their word not mine) as a
teaching tool with your seller. Show them why or why not the data is accurate and
make it clear that your knowledge can either make them more money or save them
from the frustration of trying to sell at an inflated price.

Zillow can deliver price, but you can deliver value.

And VALUE is what clients will pay for.

In the end, basic business principles still apply. You get what you pay for. Be sure
to communicate that to your clients in every possible way and you will never be
threatened by the next new technology that comes along.

Jason Leister is owner of Computer Super Guy, LLC, a Chicago-based technology
firm that helps real estate professionals profit with technology.

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