Zillow and the real estate market

We work with a customer in the Charleston market who for 17 years has increasingly expanded their market, reaching from the Isle of Palms to Kiawah and Seabrook and, recently to the residential (rather than vacation) market that is Mount Pleasant. In addition, real estate is important to our family as well; Betty’s been a Realtor® for 25 years.

Most who know me and/or have read my posts for years may remember that I’ve often pronounced the Internet as the great equalizer. The information that is online strips away virtually all the secrets of commerce (and, of course, almost anything else). A new web company, Zillow, threatens to dramatically the real estate business, and I believe it will happen in a very positive way.

First, here’s more about Zillow (from Money magazine.

And now, here’s what Fortune writer David Kirkpatrick said in his online newsletter after returning from the PC Forum:

Another new business at PC Forum that exemplified today's entrepreneurial creativity is Zillow, created by Rich Barton. His track record is good -- he earlier founded Expedia. Zillow aims to bring transparency to real estate listings with a national database of market-value estimates for, so far, about 70 percent of the homes in the U.S. It brings together tax assessments, previous-sale data, building specs, and information about comparable sales. Much of this data has been technically available to individuals in the past, but to get access to it would have been difficult. Real estate agents, for the most part, are not fans. Individual homeowners and shoppers are.

Here’s what I think is going to happen:

(1) The selling side will become increasingly commoditized. For decades, Realtors® have worked hard to win listings. That way they’ve been assured participation in the sale, whether they brought the buyer or not. But sellers are beginning to recognize that they’re the ones paying the commission for the entire transaction, and they want - they even expect - their listing agent to cut his or her commission.

(2) Selling agents post their seller’s listing to the Multiple Listing Service, which effectively announces to the world that such-and-such a property is For Sale. Some of the agents advertise the listings, usually in the classified section of the newspaper. And they wait for the buyers.

(3) Here’s who really needs the help: the buyer. He needs someone to winnow the options, to edit them to a manageable number that fit the criteria. She could use some assistance when determining value and comparatives. And he or she needs to be secure in knowing they’re in compliance, that it’s all legal.

So here’s what I think is going to happen. Either the MLS or an outfit like Zillow or even Craigslist will be seller-friendly enough to drive the listing side of the business. The buyer will work with an agent to cut through the sheer number of listings, arrange the appointments, generally bring a professional order to the buying process. It’s going to happen; it’s amazing it hasn’t already.