Zillow enters mortgage marketplace

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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.