Zillow enters mortgage marketplace

Zillow.com, the website best known for its home valuation tool, launched its new mortgage-shopping tool tonight, after weeks of whispers and hints.  The free tool allows would-be borrowers to search for real loan quotes anonymously on the Zillow site, and leaves the borrower in control of any follow-up contact with lenders who bid for their business on the Zillow site.

From Zillow's press release: "Loan shoppers tell us they want real quotes -- not just teaser rates -- when doing their research online, and they want to control who and when they contact by shopping anonymously until they are ready to talk," said Zillow CEO Rich Barton, adding, "There is an obvious need for a transparent, free marketplace."

Most online loan-shopping services -- such as Lending Tree -- require a would-be borrower to submit personal information up front. Zillow won't. Instead, borrowers ask for personalized loan quotes from real lenders, then decide whether to contact the lenders.

Zillow launches with a relatively small group of participating lenders -- it says roughly 300 individuals have registered with the site, which gives them the right to "bid" on loans. What happens if lenders use the old bait-and-switch, offering great terms until it comes time to sign on the dotted line? Zillow loan-shoppers get to rank the lenders in an EBay-like feedback system, which in theory will keep lenders on best behavior.

Zillow won't get a commission out of any loans it helps arrange. Its business model is similar to that of most media properties: first attract a large on-line audience, then sell advertising served on the site.

An interesting product, and experiment. I'm curious to hear your thoughts about it.

Comments

[Geek Seek]

It's just setting people up for disappointment and a gimmick to drive traffic to their site. Lending Tree promised competing quotes when they started out, but then it came out that they were steering the borrowers into their own mortgage unit.

The only way to compare apples to apples is to a) submit ALL of the application and documentation to two or more lenders and then have them commit on paper to specific terms to which you will hold them (but bear in mind that even lock committments were regularly broken up til now by some lenders).....

or b) work with a good broker that will commit in writing to no undisclosed ysp (yield spread premium).

There is no magic easy way; no click click click here's your loan Madame. You won't find the best deal by going on line and picking the "highest rated" lender -- you'll find the slickest salesmen.

[LeavinLA]

If it's as inaccurate as their home values, we're in for another mortgage crisis.

[Bass Ackwards]

"I provided my loan amount.....You don't need to know my loan-to-value, debt-to-income ratio, whether I'm a W-2 wage earner/ self-employed/retired, FICO score (everyone, btw, thinks theirs is "good", even the person who has been late on their mortgage 10 out of the last 12 months....."I made my last 2 payments on time so it should be good, right?). Just give me a rate. If you don't honor that rate two months after my inquiry (after a few seismic shifts in the banking sector) I'm going to trash your name to high heaven."

......Sounds like a win-win

[Rich]

"transparency" is a 2-way street. How can a legitimate lender who's following proper financial controls make an "offer" if they know nothing about you? Most legitimate lender's terms and rates are posted on web listings by state for buyers to find a la carte; the best they could do under the Zillow format is send you their general rates. A lot of work for some bank to do customer by customer, but not for some scam artist who only needs 1 easy mark.

And speaking of transparency, Zillow needs to be more open about how its' "Zestimate" of home values are arrived at; it just isn't fair to arbitrarily post a number that home sellers have to bargain against with buyers but can't determine what goes into it. Having influence over so many transactions by offering a real-time pricing algorithm makes Zillow a power player, but also carries with it some responsibility to be fair to those whose financial interests are adversely affected by the result...

[eprobert]

bass - apparently you've never seen their request form? I think it's a wonderful idea. The more transparency in any marketplace the better, especially one as corrupt and weird as mortgage banking.

[Santa Barbara Real Estate Voice]

It will be interesting to see how this pans out in this touch lending period we are in. Not the best time to launch in my eyes. Rules are getting tougher and changing by the day. Being a Realtor in Santa Barbara, if I were listing a property now and know that the buyer is using a lender online...I would have serious doubts.

Time will tell.

[mapletree]

This is and was the problem with the industry. The public doesn't get it. You can't "shop" for a real estate loan like you shop for a car or for some crap on ebay. It is so incredibly different. I remember when I was dealing with the public during the boom if you will, providing them with financing and I would tell them that rate doesn't exist for you or you will have a pre payment penalty or the other guy will switch the terms on you when you have to close escrow.

And it was always the same thing well this mortgage broker said they can do that for me, so I'm going to try it anyway.

I am a direct lender by the way. I had some people call me in a year or so wanting to refi and telling me I was right. Great I was right but the other guy made money off them and a lot by the way.

It was really difficult to stay honest but I did because I had/ still have good programs.

It gets to the point though were you really have no sympathy for these borrowers, they want and wanted everything for free or they would get suckered into the whole name brand mortgage company. Whereby the MC charged them fees up the you know what, but b/c it was so and so. It's the same with these large brokerage houses, they take 5% and list your house on the MLS--but because they have a name, people wrongly believe that they can sell it better than the little guy/gal. Not true at all. They don't have buyers. They are reaching into the same pool of buyers as everybody else.

I've limited my dealings with the public now. The majority of people are lazy and they like to be lied to. Really they don't like to hear the truth.

[mapletree]

By the way it's very obvious that zillow is trying to get into the financing side of real estate.

eprobert: what's a wonderful idea, this is nothing new. Anybody who knows anything about lending knows you can't give a real legitimate quote by filling out a request form. On the contrary this is misleading and creates more disinformation and chaos for the public and for the industry.

[perks]

Dang it--I was gonna leave a witty remark about how inaccurate their rate quotes would be, but LeavinLA beat me to the punch! :)

Geek Seek is right: My experience with Lending Tree was a complete waste of time. They didn't refer me to a single lender who I felt was reputable. I wound up doing my own search and found a much better deal.

[aspirin]

this isn't so bad. what legitimate mortgage broker would want borrowers uneducated enough to trust one of these rate-quote systems?

these are the same borrowers who think their 650 credit score is decent.

[Louis Cammarosano]

HomeGain Cries Flattery on Zillow!

http://blog.homegain.com/homegain-cries-flattery-zillow

[LeavinLA]

Perks: Sorry about that... you can have the next one ;-)

[Spencer Rascoff]

Spencer from Zillow here.
Thank you for the post and the comments.
Zillow Mortgage Marketplace has been out for about three weeks, so I thought I'd give you a quick update.

Zillow Mortgage Marketplace is off to a great start. There have already been almost 20,000 loan requests submitted by borrowers and over 56,000 loan quotes submitted by lenders. You can see those stats here: http://www.zillow.com/mortgage/Mortgage.htm
Over 4700 of those loan requests have been in California and over 2300 in LA. You can see what's going on in the marketplace by using the search filters on the left side and the top of this page: http://www.zillow.com/mortgage/LoanRequest
Search.htm?loc=California&pageSize=20

Overall, we're thrilled with the results so far. Borrowers are benefiting from the anonymity with which they can submit loan requests, and lenders are loving the free leads.