Zillow Aims to Disrupt Lending Market With Its Mortgage Marketplace

by: Mark Hendrickson April 03, 2008 | about stocks: H / IACI / LEDR / MOVE / ZIPR    

Mark Hendrickson

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Zillow, the site where you can find pricing estimates and other info about houses around the United States, aims to disrupt the online lending market with the launch of its Mortgage Marketplace.

The marketplace is a free service that hooks lenders up with borrowers. It works very much as Zicasso does for travelers (see our review of that service here). Borrowers submit just the essentials - what type of loan they need, where they’re located, their estimated property value, their credit history, etc - without divulging any of their contact info. Then certified lenders make offers that can be compared side-by-side. It’s up to the borrower to reach out and contact those lenders, not the other way around as it is with services like Lending Tree.

Zillow cites a Harris Interactive study showing that it’s more important for borrowers to keep their contact info private than to find the best rates. Apparently lenders are a bit too eager to sell you on a deal after they know how to find you. So the main advantage of this marketplace lies in protecting borrowers’ identities and tipping the balance of power into their favor.

There are other advantages to the system as well. Borrowers can rate lenders and leave comments about them, so that others can make better decisions. The extra transparency also lets lenders know what types of offers they are competing with, which could lead to more competitive deals. That’s okay with lenders, though, since they’re gaining access to a larger market for which to make their offers.

According to the company, Zillow attracts about 5M unique visitors monthly, 1/5 of which are looking for a loan and 2/3 of which are looking to buy or sell a home. We’ve also been told that 1 in 3 professional lenders visit Zillow every month. This traffic is therefore a natural fit for a service like this, which shouldn’t have a problem gaining traction.

Some other fun facts about Zillow: Of the 90m homes in the U.S., 80M are listed in Zillow and 70M have estimated prices (”zestimates”). A full 45% of the 90M total homes have been looked up on the site; in San Francisco that percentage is around 90%.

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This article has 6 comments:

  •  
    Apr 03 08:26 AM
    There will be lots of dissapointed potential borrowers. On-line mortgage lending leads to lots of frustrated consumers. This has been proven time and time again over the last several years. On-line lenders are known in the real estate community for delaying real estate closings. Borrowers in today's market place, if they have half a brain, will rely on personal referrals from people who have prior experience with a lender or the guidance of a professional.

    The current crisis has lead to the implementation of tons of new laws and agency regulations, rate add ons and restrictions. It is impossible to give an accurate rate quote without the benefit of a credit report and full application. Sketchy basic information will lead to surprise after surprise and the consumer will lose confidence quickly.
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  •  
    Apr 03 08:56 AM
    Putting personal info out for ANYONE to see.......hmmm......I'... pass. It's one thing to input the value of your home, but quite another to start putting out income and other related info you'd need to get loan offers.

    Sorry, I'll stick with lending tree. I've used them 3 times and NEVER had a problem, even when one of my closing dates happened to be 9/11. Simply called the broker and rescheduled for the next day.
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  •  
    Apr 03 11:06 AM
    Anyone who's taken out a mortgage or refinanced in the last few years has been treated to an avalanche of offers from unscrupulous mortgage and insurance brokers flooding their mailbox. It's likely that these predators and scam artists will be the pool of interested parties on the other end, not legitimate mortgage companies. Zillow has a great concept web site that still doesn't work right for the home listing end, so they should concentrate on fixing that part of what they do. They also need to explain to the growing unhappy portion of their users just how their "zestimates" of home values are calculated, because it's patently unfair to the homeowners to have to negotiate with buyers over an estimate made in black-box fashion that they can't argue against.
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  •  
    Apr 03 12:38 PM
    tcornelison is absolutely right. Answering the question, "What's are your fees and your best rate?", cannot be answered in today's mortgage lending environment. It really does take time to analyze the client's total situation (credit, income, LTV). There are so many new changes that have been implemented just within the past 6 months. Finally, Malkiel is also right, find a credible lender from personal referrals that will provide you the level of service that you need.

    @Dectra - You completely missed the point of the Zillow product. Zillow will not give provide your info to the lenders like Lending Tree does now. It sounds like you had a good experience with LT but they do provide all of your info (income, contact info, etc) to the lenders.

    Good luck to Zillow, I am sure it will be successful for them.
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  •  
    Apr 18 10:52 AM
    Disrupt the lending market? Isn't it essentially in shambles already? I think we're just dropping an ice cube in an already boiling-over pot.
    Reply | Link to Comment
  •  
    Oct 07 05:30 PM
    Whenever someone claims they're going to disrupt a market as part of their marketing message, I'm suspicious. Disruptive innovation is not a marketing buzzphrase, and it's only relevant to internal business and marketing strategy, and possibly to major investors.

    Zillow, in fact, is not even remotely disruptive. To start with, they'd have to have accurate and reliable information in their system. And you can't automate comparables, especially when there is high market volatility or a transitional market (e.g. in-fill housing that is twice as expensive as neighboring homes). It also doesn't account for major changes, such as adding a second story, a complete gutting and renovation, tear down and replacement, or foreclosures which temporarily distort markets. If the information can't be relied on, there's no reason for buyers or sellers to go there. All it does is add friction to the process.

    To be disruptive, a product or service or business model must address a real problem and serve an unmet or under-served market need. Zillow does none of these for the end consumer. At best, it provides a ballpark estimate of a home's value before I commit to talking to a realtor, but there are numerous other places I can also get that information.

    Sorry, no disruption here.

    Wondering if you do any analysis, or just read off the vendor's press release.
    Reply | Link to Comment
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