by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Greg Swann covered the big Zillow Mortgage announcement so I won’t regurgitate the details here. I will weigh in my opinion and speculate about the consumer offering.
I share Greg’s enthusiasm for an independent originator database. The industry can’t get it together and the Federal government may be violating the Constitution if they remove the licensing authority from the states. While the National Association of Mortgage Brokers contemplates, private industry acts; and act they did. Here’s the other cool part; both banker-employed and broker-employed originators are required to register with Zillow and have their employment verified. Zillow accomplished what the government couldn’t.
What Greg may have missed is that lead aggregators, like Lending Tree, really don’t offer much of a background check. If the credit card is good, they’ll sell leads. What Zillow has done is to disintermediate the lead aggregators and that, is a good thing. The unlimited access to consumers will be a great offering for originators because it will allow them to focus their efforts on delivering good customer service to Zillow readers. Originators who are not good marketers or who desperately want a consumer-direct channel may find joy in the Zillow offering.
I’m not one of those originators because I focus my efforts on referral relationships with Realtors, accountants, and financial planners. I’m not one of those originators but I want to play. Why? The offer is just too damned interesting to pass up. Competition will be key as Zoriginators try to compete for business.
Now, here’s my opportunity to be critical of the Zillow mortgage offering; they may attract the very least talented originators. We’ll see when the consumer offering comes out. The traditional “order takers” of the mortgage industry ,with time to engage in anonymous repartee with consumers, are not the most talented of our industry. In fact, they may lack the courage (and financial reward) to properly educate consumers about the appropriate loan product for their financial situation. Let’s face it; if you create a model that encourages the commoditization of a financial product, you leave little incentive to attract the heavy lifters who educate and monitor mortgage opportunities for clients.
The disincentive for talented originators to compete may very well have Zoriginators fighting to offer the most expensive loan product (for some consumers) at the lowest cost.
Greg reported my speculation about the consumer offering. I believe it will be a Good Faith Zestimate of loan terms, based on the predicting algorithm they use to create the Zestimate for home prices. Again, this is absolute speculation on my part. Sara, David G, and Drew, immediately turn into poker players when I question their offering. They surprised me (delightfully so) with their mortgage professional offering and could shock me in a few weeks.
Here’s the big thought: For all my criticism about the speculated consumer offering, there is no way I question the amazing thing they’ve accomplished today. With one fell swoop, Zillow may have started an irreversible trend towards professionalism and accountability in the mortgage industry.
…and that’s a good thing; we need it.
Greg Swann says:
Here’s my bet, and then to bed: Your profile will provide an opportunity for your Zillow-referred clients to report on their experience with you, Ebay-style. This will tend to reward high-touch, rather than low-costs, but people like what they like — and any standard of value is better than none.
March 7, 2008 — 1:47 am
Brian Brady says:
You talked about this, Greg, in your article. Client reviews could be really helpful. Todd Carpenter said it best when he tries to figure out a way to leverage the Zillow offering, no matter what. I’m guessing what the consumer offering will be. My guess comes from speculating with Todd.
In fairness to Zillow, I’m also relating the experience to Trulia Answers (the experience is brutally tedious for someone like me).
An originator who is desk-bound, and tied to a computer, can thrive as a Zoriginator. An originator who has high touch tools (I do) can thrive as a Zoriginator.
March 7, 2008 — 8:14 am
Todd Carpenter says:
The least talented originators will never bother to go play on Zillow in the the first place. They’ll keep buying trigger leads, and calling unsuspecting borrowers at diner time.
The most talented may or may not play. It all depends on how they’re currently successful.
But I mainly agree with you. The real test of how effective Zillow’s product will be is how easily it allows the cream to rise to the top. We already have plenty of existing models that are great at doing the opposite.
March 7, 2008 — 9:59 am
Jason Lopez says:
Brian, as you know RealEstate.com is part of the Lending Tree family, and while I am not going to bang the drum here, I do want to point out that your comment about Lending Tree was not entirely accurate. LT certainly takes the credit card, but lenders are screened and trained, etc. In fact many lenders fail because they are just not up to snuff. Customers are surveyed and those lenders not meeting the service standards are uninvited, good credit or otherwise.
And it is hard to argue with numbers…Lending Tree has served over 20 million customers since it’s inception just 10 years ago. Now, that being said, I’m interested in seeing what Zillow brings to the table on the lending side. One question is, “What is the benefit to the consumer?” I see the originator getting access to the consumer, so there again you have a “lead”. How does the consumer benefit from that? Especially if any lender can simply sign up and answer a few questions. Is that screening? I don’t do loans, but as a broker I can. But how does me doing a loan provide the best service to a consumer? It doesn’t…that’s why I send the to a loan professional. With no “real” screening process, could the inmates end up running the asylum?
March 7, 2008 — 11:06 am
Brian Brady says:
Jason,
Thanks for the correction. I didn’t know LT screened people.
March 7, 2008 — 1:16 pm