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It's been more than two months since I last posted about online real estate. Not coincidentally, it's also been two months since I put my house on the market. I knew that if I posted about the home selling process during the last two months it would have devolved into a rant that would have led straight to the strikethrough font.
So, now that I've resigned myself to the reality that it may take six months or more to sell my house, I would like to ask a few questions of the team at Zillow.
First, let me explain why I am singling out Zillow. I think that as the best funded Web 2.0 startup, they should be held to a higher standard than others. They're also operating in an arena that affects more people in a more substantive way than say, the seventh best online video sharing site does, or another social network targeted at teens does. That's because Zillow provides people with what is purported to be fairly accurate information about the price of their homes so that when they go to buy or sell a home, that valuation can serve as an important metric in making decisions such as what price to pay or accept.
So, to my questions:
1) Why, after raising $57 million in venture capital are you still so far off the actual valuation of my home?
2) What are you really doing with all that money?
The second query is rhetorical, the first one is not. After talking to competitors, I'm convinced the cost to create the home valuation service is not more than $2 million. Ongoing service costs and design may have been more at Zillow since it's more user friendly, but not that much more. And the company has plans to release its API to developers, expand into mortgage information and go mobile, but I'm very curious where that other $55 million is being spent.
I hope the answer is to improve the algorithm used to calculate the prices of people's homes. Because the company's original estimate of what my home was worth was $162,000 more than what I originally offered it at. And the original selling price in May was $50,000 more than what it's being offered at now, so you do the math.
To the company's credit, they responded directly to my criticism in a thoughtful and prompt manner. They noted that they have provided me with information that enables me to have a more informed conversation with my real estate broker and that I have been able to conveniently find a list of recent sales in my neighborhood. They added that they are working on a specific algorithm to come up with better valuations for condominiums. And, as you can see from the chart below, the price of my home dropped severely after my initial post in May critical of their valuation tool. My entire neighborhood experienced a $100,000 haircut.
So, my suggestion to Zillow is this: Take some of your cashpile and sort this trouble out before expanding every which way. Pricing a home is an art to be sure. However, if you're going to build a business on the premise that you will provide useful and free home valuation services online, then they better be useful (and free). If you can't come up with a reasonably accurate home valuation quote for the 67 million homes you currently cover, then whatever it is you're planning to do with the other $55 million you raised surely won't fly.
I will continue providing ongoing updates about my use of online real estate tools as my home selling process progresses (or remains stalled as the case may be.) I'm hoping this experience will help venture capitalists get a better understanding of how new technology is affecting the $60 billion real estate market and whether current startups are addressing users' needs.
Tags: zillow, realestateabc, realestate, benchmark+capital, vc, venture capital
I think it is funny. YOU personally can contact Zillow and give them the info to update your home, or so I have heard. How great a job is that. You get all this money and you still have to get the homeowners to give you the info. Of course, for homeowners like yourself, it pays to want the info to be correct. Zillow is made of people who know nothing about real estate, but since they just bought a home they got a great idea. Funny, they are trying so hard not to tick realtors off, until they are ready to pull the rug out from them. I am expecting Zillow to go full listing of homes so people can bypass realtors. Same thing they did to travel agency with expedia.com except people have ALOT more to lose. It is different paying a couple hundred dollars for a flight and not getting what you want and buying a home and spending HUNDREDS OF THOUSANDS of dollars and not being happy. Not to mention the lawsuits that can result from mishandlings. I guess ex-expedia Ceos, now current Zillow CEOs don't look at it that way. They just look how they can do something else on the internet that will get them even more money.