My take on Zillow has always been that accurate Zestimates was never particularly important to their business… What mattered was that people were talking about them. Zillow’s first strike of brilliance was that they took something that was traditionally complicated (getting a home value) and made it better than simple for consumers; they turned it into a fun game (“Honey, let’s go check how our home value changed since yesterday!”).
With mortgages, Zillow went to the other extreme. They took a process where consumers view it as somewhat of a game (“Honey, how is the broker advertising this low rate going to screw me over now?”), and made it boring. Before you get mortgage rate quotes, a consumer has to fill out a long form with all kinds of financial information (boring!).
But the result is that pre-vetted lenders will view an (anonymous) version of a consumers profile and then make appropriate quotes. Brokers are expected to stick by their quotes, because if they don’t then consumers will give them bad ratings.
Here’s what I like about Zillow Mortgages:
- It’s a well-thought out idea that appears to be well-executed
- It’s awesome that consumers are in control of their information throughout the process and their personally identifyiable information is kept private. And eBay-style ratings of lenders will (over time) give consumers a great indication of how well a lender performs
- Zillow is not charging any transaction or referral fee to lenders (only $25 to run a background check), so lenders have almost no reason to not try it out.
The problems I see have less to do with the product itself and more to do with some of the business and marketing implications of the project. Here’s the two main issues I see:
- There’s something to be said for mortgage companies that optimize their operations so much that they can not only provide competitive rates but also consistently acceptable service. However, the very nature of the program seems designed to create a downward spiral for lenders where they need to find the lowest possible point that they can bid and still stay in business. While this is great for consumers, it can be dangerously addictive for companies that are looking to create a viable long-term business. A great case study of the danger of this type of behavior comes from a story where Vlasic went bankrupt after introducing low-priced pickles at Walmart. Either way, this really isn’t a problem for Zillow, since there will always be other mortgage lenders willing to take their chance at providing an efficient mortgage product to consumers.
- There’s nothing sexy about this tool. Unlike Zestimates, which were relevant to almost every homeowner, mortgage quotes are relevant to a much smaller population. And without the benefits of voyeurism (“Honey, let’s have fun with a few lenders today and fill out a fake mortgage profile on Zillow!”), I just can’t see how they will achieve the buzz that they got with Zestimates.
As you can see, even the negative stuff is just not that bad. Compared to the existing situation, the fact that Zillow made mortgages boring is obviously a plus for consumers who want to get the most value out of the loan process.
(Full disclosure: Zillow is a sponsor of my 4RealzEd seminars, and so are many other companies in the online real estate space, so assume that this article, and pretty much most of the articles I write, come with a clear bias!)