Free Online Data Shatter MLS Real Estate Model
Technologies offering free on-line property information are changing the real estate business and quietly building a mighty force that is poised to obliterate the National Association of Realtors‘ (NAR) virtual monopoly on property information and decimate the concept of the 6 percent agent commission.
Until recently, it was challenging to operate in the residential real estate market without access to the NAR’s multiple-listing service (MLS) because only realtors really knew what homes in any given area were selling for. Realtors who shared the information generally expected a return for their data sharing and professional services, usually in the form of a 6 percent commission on subsequent property transactions. But times are rapidly changing.
The Holy Grail: Data Accuracy
Soon, an estimate for just about any home’s value will be available online from sources such as Zillow.com. Many already are. But are the data accurate? A 2007 Wall Street Journal analysis of 1,000 home sales shows that Zillow’s “Zestimates” often are accurate, often within a few percentage points of the actual price paid. But when Zillow is off, the disparity can be dramatic.
Zillow.com officials say that constant refinements to their system make the data more accurate today than ever. Changes to the back-end of the system and enhancements like adding a process whereby owners can update their property information in Zillow.com’s system all work to maximize on-target data reporting.
Objectivity Fuels Credibility
Still, services such as those offered by Zillow.com are not yet perfect. Zillow’s valuation protocol is most accurate for mid-price homes in areas where there is high property turnover; it is less effective in neighborhoods where people seldom move. But the time may come when Zillow is seen as more reliable than human brokers, Money magazine reports.
Often, brokers and owners have an incentive to inflate estimates to win prospective clients and are not always tuned in to market changes. Data from sources such as Zillow.com are far more objective and are becoming more widely used by consumers, brokers and by major media media outlets to establish important benchmarks in the real estate market.
In other words, if everyone uses the data, the provider can become a significant force in the market. For example, financial news giant Bloomberg recently reported that U.S. home values dropped 7.7 percent in the first quarter to the lowest in almost three years, based on estimates by Zillow.com. The article says this is the largest decline in 12 years of data compiled by the Seattle-based online data provider. When the media major players cite a particular data provider as a source, it lends great credibility to the quality of the information outfits like Zillow.com provide.
All Aboard the Gravy Train
Zillow.com launched its Web site in 2006 to provide homeowners, real estate agents and potential buyers with value assessments called “zestimates” for single-family homes, co- operative apartments and condominiums. The company has since become a real estate powerhouse, recently expanding its operation to provide mortgage market information services. In the past couple of years, competitors have sprung up for a taste of the gravy snatched from the plates of brokers and others working from the tradtional MLS system data model.
According to Online Media Daily, in December 2007, San Francisco-based Trulia.com managed to edge out Zillow.com, AOL Real Estate and HouseValues in terms of unique visitors. The site nearly tripled its audience from the previous year, growing from 579,000 unique visitors to 1.6 million. Trulia recently sweetened the user experience by offering not only listing info and photos, but access to view the property via Google’s popular Street View Map option. Google Street View where it’s available, gives users an interactive, mobile, street-level view of properties and neighborhoods.
John Vogel, who teaches economics and real estate at Dartmouth, says that the democratization of real estate data imperils the future off the 6 percent real estate commission. Real estate brokers will retain a role as marketers, especially in tough markets. But, Money magazine says, like stock brokers before them, they’ll find that as they lose their traditional monopoly on information, they just can’t command their traditional price.
Below is a list of five top real estate valuation Web sites (My personal favorites are Trulia and Zillow).
Tags: AOL Real Estate, bloomberg, Google, Google Sidewalks, MLS, money magazine, multiple listing service, NAR, national association of realtors, Online Media Daily, real estate agent, real estate broker, real estate news, Trulia, Wall Street Journal, Zillow
May 20th, 2008 at 3:09 pm
Zillow is a great tool to get the ball park value of a home but it is and will never be better than a human. Case and point, Zillow has no idea of upgrades to a home, landscaping, kitchen remodles, views, etc. I am not a broker or an agent but in order to accuratly assess a homes value there are many more features than just bed, bath, and sf. All the factors of a home go into the value of a house/property.
Only a human can get accurate info on a property value. I do agree that Zillow can get close but to use this value to buy or sell a house without more info would be a bad idea.
May 20th, 2008 at 10:48 pm
I agree. We humans still do have a purpose in business. I’ve been surprised to read about how much of an impact resources like Zillow are having in the markets. I’ve been telling all my family and friends to make sure they keep their property information updated so that their improvements and assets are part of their Zillow listing.
June 9th, 2008 at 7:10 am
We also like http://www.cyberhomes.com. In my market it has been somewhat more accruate than a couple of the others. I am a “recovering Realtor”. I only market my own stuff these days. I had 5 short sales listings during the last year and NONE of them closed. I won’t work for tips anymore. I have finally figured out how to outsource! And not a moment to soon!
June 9th, 2008 at 10:53 am
I found this information very interesting and something to keep an eye on. I have found Zillow to be low on their estimates, however it is a starting point. The day that this data is open sourced shall be impowering to real estate entrepreneurs.