Consumers Like Zillow—Will Originators?

MBA (4/3/2008 ) Sorohan, Mike
Two years after launching a popular consumer home price appraisal web site, Zillow.com, Seattle, hopes lightning will strike twice—this time with originators.
The company this week launched Zillow Mortgage Marketplace, offering borrowers an anonymous way to solicit mortgage loan bids from loan originators. The site takes the concept popularized by LendingTree several steps further, said Spencer Rascoff, Zillow’s CFO and vice president of marketing.

“We have a great site for homeowners, but we wanted to marry the need for both borrowers and lenders,” Rascoff said. “It’s designed to have far greater consumer appeal because it’s anonymous. It’s available to 150,000 lenders instead of four, so the model distributes more broadly. And it’s free for originators—your officers have to spend time only pursuing borrowers who want your loan.”

A recent Zillow survey found that respondents had concerns about applying for loans online because of the potential to share data—particularly Social Security numbers—with people they didn’t know.

“Consumers don’t want incessant phone calls from online sites that share personal information,” Rascoff said. “Plus, many people said companies that obtained the data performed credit checks, which they know hurts their credit score.”

Through the Zillow Mortgage Marketplace, borrowers click on a “mortgages” tab on Zillow.com. That directs users to a loan request form, including type of loan, amount, length, location and other basic information, excluding personal information, which Rascoff said Zillow does not sell.

Once the borrower submits the request, it becomes part of a database that registered Zillow lenders/brokers (Zillow itself is not a lender) can browse and, if interested, submit non-binding quotes. The system requires originators to disclose all fees upfront; Zillow then estimates taxes and insurance and provides an estimated monthly payment.

“This makes it easier for borrowers to compare loan quotes on an apples-to-apples basis, note differences and better evaluate overall affordability,” Rascoff said. “The borrower decides which lenders they want to contact, if any, maintaining complete control of the process. Only when a borrower contacts a lender will their identity be revealed.”

The feature also allows registered Zillow originators to view competing quotes and to modify their own quotes accordingly. “The borrower is not limited to four quotes,” Rascoff said. “If 25 originators want to submit a quote for a particular borrower, they can, and the borrower can view all 25.”

Only when a borrower chooses to initiate contact with a particular originator does the borrower’s anonymity end. At that point, Rascoff said, the originator can obtain additional information from the borrower, such as Social Security number, and decide if the quote is still viable.

An additional feature is an originator feedback channel for borrowers, who are asked to rate their experience with originators. To participate in Zillow Mortgage Marketplace, originators must pay a $25 fee and submit information that Zillow confirms, including professional/employment status (including licenses); create a public profile and accept borrower feedback; and agree to a Code of Conduct. Rascoff said the code of conduct prevents “bait and switch” tactics; and the company reserves the right to remove any originators it deems have violated the code.

Zillow launched its Zestimate site in 2006, which put the company on the map. The site, which provides non-binding information about potential prices for homes and neighborhoods, along with aerial photos of homes, attracts more than five million unique visitors every month. Initially criticized for confusion over the authenticity of its information, the web site now states clearly that the Zestimates are not binding appraisals.

Zillow data shows that 90 percent of its users are homeowners, of which two-thirds are either buying or selling a home or plan to in the near future. “A lot of mortgage professionals use Zillow, too,” Rascoff said. “We estimate that more than one-third of all mortgage professionals in the U.S. use us in any given month. It’s going to be very exciting development for mortgage banks—a great opportunity for banks to build business in an environment that can be very favorable for them.”

Zillow CEO and co-founder Rich Barton said the company hopes the Mortgage Marketplace will have the same impact on the lending process as the Zestimate site. “There is an obvious need for a transparent, free marketplace,” he said.