Zillow.com notes: Fear and Ludditism, advertising, a better farming strategy and more
By: Greg Swann,
Phoenix Real Estate,
Post Archive,
RSS FeedPosted: Friday, April 20th, 2007, 9:27 am MST
Category: Blogging, Marketing, Real Estate, Technology, Zillow.com
Zillow notes: Jay Thompson, The Phoenix Real Estate Guy asks “Why do so many agents fear Zillow?” He makes the same point in a BusinessWeek article on the Seattle-based Realty.bot.
Brian Brady, America’s Most Opinionated Mortgage Broker and a BloodhoundBlog contributor, covers some of the same ground: “Is your Realtor threatened?”
Both gentlemen are objecting to what we might characterize as the opportunistic bandwagoneering going on with respect to the Arizona Board of Appraisal’s attempts to outlaw consumer-oriented Automated Valuation Models. I can’t speak for them, but for me this is a matter of vitally-important principles, liberty the first among them.
I may write more about this over the weekend, because the issues involved are vast and very interesting — at least to me. Earlier this week, in email, I wrote, “When the sabot is a Ferragamo, Ned Ludd has a whole new style.” I have no doubt that this regulatory and legislative initiative is Ludditism in a Brooks Brothers suit. It’s bad enough that Zillow is afflicted, but I expect this is but the first salvo in a long war.
Witness: This came in as a comment last night, but I wanted to highlight it:
MLSPIN of Massachusetts just sent out this notice:“RULES AND REGULATIONS REMINDERS:
I. Recently, the On-Line Valuation site, Zillow announced a new function being made available to advertise listings for sale on that site, whether or not you are the listing broker/agent. The MLS Rules and Regulations, STRICTLY PROHIBIT the advertising of another broker’s listings without their prior WRITTEN consent. The REALTOR&174; Code of Ethics, Standard of Practice 12-4 also prohibits the advertising of a listing without proper authority. Better safe than sorry; do not advertise another office’s listing anywhere without prior written approval.”
“Better safe than sorry” is an interesting choice of words.
Even more interesting is the fact that MLSPIN is arguing that MLS members have fewer rights to act than ordinary people. As things stand now, any non-MLS member can advertise another party’s home for sale, but, of course, no one does. Why? Advertising costs money. But anyone except MLSPIN members can announce that another party’s home is for sale on Zillow.com. And they’re doing it, too. Zillow’s listings are up by about one-third since the Zillow 5 software release on April 3rd. Why? Whether or not it’s advertising, announcing that a home is for sale on Zillow does not cost money. In the Age of Abundance, we’ll have to decide if out-of-pocket-expenditure is an essential component of advertising. Even so, it seems unreasonable to me that MLS members should have fewer rights than ordinary people.
But: That’s as may be. Your favorite lender can do the work you are forbidden to do. So can your kid, for that matter, provided there is no compensation (and who doesn’t love to see his own issue working for free?). It’s absurd to argue that the the announcements I make all day long through my IDX system somehow become advertisements on Zillow, but this is an easily-skirted absurdity.
Plus which, I’ve been sitting on an even better pee-on-the-tree strategy for Realtors farming Zillow.com: Instead of announcing homes for sale, walk the neighborhoods you farm, taking photos from the street or sidewalk of every one. Post those photos one at a time to Zillow. Doing this, you will have marked your entire territory, essentially in perpetuity. Anyone shopping your neighborhoods is going to run into you again and again. It seems reasonable to me that people will tend to investigate homes near those they might be interested in buying. What better way to establish yourself as the neighborhood expert than associating your name and contact information with every home they might turn to?
And: This is me in today’s Arizona Republic (permanent link). I wrote this before I knew about Arizona State Senate bill 1291, but it holds up okay:
Real Estate: Internet valuation not an appraisal
The Arizona Board of Appraisal has sent Zillow.com two letters demanding that it “cease and desist from all appraisal activities in the State of Arizona until such time as they are performed by a licensed or certified appraiser in this state.” The Criminal Division of the Arizona Attorney General’s office has also sent a similar letter to the Seattle-based internet real estate portal.
The conflict turns on what an appraisal is. Zillow.com argues that the results of its Automated Valuation Model are not appraisals, and its web site puts a disclaimer to that effect on every page. In defining an appraisal as “an opinion of value,” the Board of Appraisal would seem to have set itself in opposition not just to Zillow.com but to other popular real estate valuation sites — Eppraisal.com, CyberHomes.com, etc. The Board of Appraisal has not sent notices of violation to these sites.
Here’s another way of thinking of this: An appraiser is contracted for hire to offer evaluations to buyers, sellers or lenders in the expectation of compensation. None of these characteristics apply to consumer-oriented AVMs. No one asks Zillow or its competitors to evaluate a property, and no one pays them for having done so.
More importantly, the output from a consumer AVM cannot be used to obtain a mortgage — the overwhelming source of business for appraisers. The appraisers will argue that unrepresented buyers and sellers are using Zillow’s “Zestimates” or other AVM results to evaluate properties, but this is certainly their own business. Given that they had been working from anecdotes and gut-feelings before, it’s hard to claim that they are somehow worse off now.
I think the real issue is the threat posed by objective, automated, internet-based systems to state-licensed functionaries like appraisers or real estate agents. Is a Zestimate as good as an appraisal? Maybe not. But if an unrepresented seller and buyer agree about the value of a home in an all-cash sale, whether or not this agreement is buttressed by an AVM, should they be required by law to spend $350 for an appraisal?
Further notice: Todd Tarson at the MOCO Real blog.
More:
- Arizona Board of Appraisal to Zillow.com: In your Zestimation, does this posturing make us look stupid?
- Zillow.com at the Dawn of the Age of Abundance: Working for free is not a crime, trying to forbid it is…
- “Zillow’s Arizona valuations questioned since the beginning”
- Idle chatter of idle neighbors to be outlawed in Arizona: Appraiser’s job protection act passes Arizona State Senate
- Protecting whom? There are no complaining parties in Arizona’s quest to outlaw free consumer-oriented home evaluations
- Zillow.com notes: Fear and Ludditism, advertising, a better farming strategy and more
- Arizona Republic: Realtors side with Zillow.com
- KTAR Radio on Arizona’s attempts to stifle Zillow.com
- Zillow.com dodges bullet in Arizona: Amendment would permit consumer-oriented automated valuation models to operate without regulatory oversight
- Arizona appraisal bill, amended to permit AVMs such as Zillow.com to operate in state, fails to pass
- Waxed Fruit Hegemony: Taking over the world one random media appearance at a time
- Waxed Fruit Hegemony: The Director’s Cut
- What this state needs is more public ridicule! Arizona House to reconsider Zillow.com-proofed bill on Monday
- Are you an appraisal scofflaw? Are you sure you know what your client is doing with that Broker Price Opinion?
- State vs. Zillow.com will be a lengthy bout
- East Valley Tribune slams Board of Appraisal over Zillow.com censorship, endorses Reagan amendments to SB 1291
- The Zillow.com persecution: Why it matters to all of us
- Arizona appraisal bill, amended to allow web sites like Zillow.com to operate, passes House, returned to Senate
- “Here’s a better idea: How about abolishing the state Board of Appraisal?”
- Zillow.com exemption: Arizona State Senate gives itself a frank appraisal, elects to seek out other feet in which to shoot itself
- Zillow.com off the hook in Arizona?: “State rethinks crackdown on online home appraisals”
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9 Comments so far
When you chant “Beat LA” at a Padres game you implicitly set the Dodgers as the benchmark against which all other teams are measured.
If you keep screaming about Zillow in front of the consumer, the consumer will finally say, “Hey! NOW Zillow has value”
My message to disgruntled Realtors and lenders:
http://activerain.com/blogsview/79399/Zillow-If-you-can
I’ve given cursory glance at the topic…is the lending industry in AZ at any risk?
Why, Bank of America runs an AVM for every new mortgage loan or home equity loan / line of credit…its a part of their underwriting process…but does not replace it in all scenarios of course.
If homeowner desires capital (home equity loan) to put in that $20,000 swimming pool, BofA runs an AVM at some milestone.
When lending is nominal from the eyes of BofA…credit check on the lendee, an AVM, some Q&A w/ the lendee may do the job, etc., where no formal appraisal on the home has to be completed from the eyes of BofA.
Brian/Greg, will the lending industry be affected by such actions? Again, I’ve given cursory to the whole topic, as it appears consumer AVMs are the focus. Can’t imagine BofA being forced to use an appraiser for a consumer looking for 5K home equity loan, when an in-house AVM (and other procedures) are good enough for them.
Marc,
FIRREA and its related regulations exempt certain categories of “federally related” loan transactions, such as most equity loans, from Federal regulatory appraisal requirements. “Evaluations” rather than appraisals are permitted for the lending transactions in these categories.
Appraisal boards have maintained unsuccessfully that they can enforce state laws that they interpret to prohibit “evaluations”. However, Federal law trumps the states’ laws in this area.
Cathy,
Thanks for the clarification. Interesting events all-together.
Marc
Great question, Marc. Cathy can tell you the legal implications but I might point out the practical application.
If the valuation task force of the local police department raided the local mortgage company, we’d probably suggest that we relied on the WAG appraoch to valuation instead of the AVM.
I can’t see how they could regulate internal AVMs
Greg said: “Is a Zestimate as good as an appraisal? Maybe not. But if an unrepresented seller and buyer agree about the value of a home in an all-cash sale, whether or not this agreement is buttressed by an AVM, should they be required by law to spend $350 for an appraisal?”
Greg . . .Where is there a “law” that requires an appraisal be obtained for the situation that you describe above? There’s no mortgage, so FIRREA would not come into play.
You comment on the “objective” nature of AVM (Automated Valuation Models). That’s an area of contention by many. ARE they “objective”? Does anyone know the model structure (or algorithm) that Zillow is using? I bet not.
I would say that a better term might be “consistent”. If there IS a bias in the model, its probably applied consistently across the nation.
As an appraiser, I don’t know many appraisers that fear Zillow. I think most of us think of it as a “consumer” tool that’s used for fun and curiosity. Lenders most likely are using internal proprietary AVMs tools or the Desktop Underwriting programs offered by Fannie Mae or Freddie Mac.
It might also be used as a pre-qualifying tool by mortgage brokers in quoting a loan rate? I say GREAT! I’d much rather they use Zillow than call ME shopping for an unpaid “Comp Check” that 9 times out of 10 ends up in hard feelings for a number of reasons!
Looks like Brian and I are on the same page…
[...] We believe consumers have rights to open and transparent real estate information, for free. We believe attempts to limit or restrict access to this information are not in the best interest of consumers anywhere. Thus we’re extremely pleased at the passing of this bill, and appreciate the leadership shown by Rep. Michele Reagan and Sen. Barbara Leff in response to actions by the Board of Appraisal, not to mention the citizens of Arizona who insisted their legislature do the right thing. We’d also like to thank the Board of Appraisal and Vice Chair Charlie Havranek for responding quickly and reconsidering the issues at hand. [...]
[...] On Monday, Arizona Governor Janet Napolitano signed SB1291 as ammended into law. This was the bill that caused much discussion here and elsewhere that, in a nutshell, originally attempted to force automated valuation model providers such as Zillow.com to stop providing estimated home valuations to our fine citizens. Also in late June, the AZ Board of Appraisal finally got a clue and rescinded their cease and desist letters previously sent to Zillow. [...]