Expedia Founder Applies His Know-How to Real Estate
A decade ago, Richard Barton launched Expedia.com and helped transform the travel industry by handing consumers the same tools to book reservations that travel agents had long controlled.
Now, Barton is applying the same approach to real estate -- and is banking on equally dramatic results.
Today, he will unveil a beta-test version of Zillow.com, the latest website to offer property information that has until recently been beyond the reach of the average buyer or seller who didn’t engage a real estate agent.
As Barton sees it, Zillow can be the real estate equivalent of the auto world’s Kelley Blue Book. By typing in an address, the user gets an instant valuation of one home or all homes on a street or neighborhood.
To get that information, Zillow would pore over county records and other government data on 60 million homes nationwide. It then would use proprietary computer analysis to determine current values, which the company calls “zestimates.”
The Seattle-based company’s objective is to create as complete a record as possible on individual properties. Providing a home’s history, including all past sales transactions, tax assessments and other details, should help put buyers and sellers on better footing during a real estate transaction, Barton says.
By cracking open the real estate process, “consumers will make better decisions and become smarter,” Barton said during a brief demonstration of his website. “People want to be empowered with information so they can take control of what is scary and difficult and fraught with frustrations.”
Giving consumers more access to information could lead them “to negotiate more economically sound prices with real estate agents,” he said. Many people don’t know values even in their own neighborhoods, he said.
Zillow could even lead to lower commissions -- much like Expedia did with travel fees, Barton said.
Zillow is hardly the first real estate site to help consumers figure out a home’s value. IAC/InterActiveCorp’s Domania, HomeGain, HouseValues and other sites were established in the last few years as appetite for real estate information expanded along with home prices.
But computer-based valuations can be as much as 30% off the mark, industry experts say, because the business of selling homes tends to be more an art than science.
“Every property is an illiquid, unique asset, and a computer program cannot accurately predict the price it will fetch on the market,” said Matthew Haines, founder of PropertyShark.com, which boasts one of the most expansive collections of real estate data for the New York area and is a potential rival to Zillow.
Barton said Zillow’s national margin of error for home values was 7.2% because it assessed more data than most online real estate evaluators. Zillow touts an exclusive tool that allows users to factor in particulars about a house, such as whether it needs a new roof, to further refine a home’s value.
What’s more, a home’s value on Zillow can be tracked historically against the performance of local, state or national real estate markets, much like comparing a stock against the Standard & Poor’s 500 index. That’s a feature Barton says is unique.
“We think that a key component to a fundamentally healthy marketplace is price transparency,” he said. Most buyers and sellers “are not seeing what the last 20 people paid” for a property.
But in a Web world clogged with real estate offerings, will Zillow be able to stand out?
Barton says that on a mere “snoop level,” consumers will be attracted to his site, in part because it requires no registration and doesn’t route users to real estate agents seeking customers, which is common among many sites. Zillow instead hopes to make its money by selling advertising space to brokerages and mortgage companies.
At least initially, Zillow would not provide sales listing information and thus would not indicate if a home is on the market.
That could be a problem in the short term, said Greg Sterling, a local media analyst at the Kelsey Group. Listings are among the top reasons consumers and advertisers seek out real estate sites.
“They will need to build that in as part of the package to make it useful to advertisers and consumers,” said Sterling, who was among a few industry experts given a preview of the site. Still, he thinks that Zillow can be “one of the couple” of successful national real estate sites, mostly because of Barton.
Barton was a lead product manager of Microsoft Corp.'s travel business unit when he helped create Expedia, which was spun off in 1999 with Barton at the helm. He sold the company to IAC in 2003. Expedia is the leading online travel reservation site and operates as a separate company.
Thanks in part to Expedia, 80% of travel is booked online, and the number of travel agents has fallen nearly 40% since 1996.
For much of last year, Barton teased the media about Zillow without revealing any details, generating articles in mainstream and industry press. The hype helped persuade investors, including Benchmark Capital and Technology Crossover Ventures, to pony up $32 million in venture capital.
With such funding in hand, Zillow may become a big kahuna of real estate data sites, and one that could go public.
The biggest fish in the online real estate pond -- and the one with the highest name recognition -- is Realtor.com, a display of for-sale homes. The site is partly owned by the National Assn. of Realtors and doesn’t offer any data beyond property listings, but the company has hinted that that could change.
If that were to happen, PropertyShark Chief Executive Ryan Slack said, “it could be hard for Zillow to lure people away.”
Yet, Slack acknowledged that Zillow could challenge sites like his, which don’t necessarily have the same financial heft or tech superstar at their helms.
“In the face of this $32-million dollar gorilla, we do have some fears of them treading on our space,” Slack said.
PropertyShark on Tuesday added a home sale-price interactive map for Los Angeles County and other U.S. markets in response to Zillow’s debut.
If anything, arming consumers with information from the Internet has made the real estate process more efficient. A Realtors association study found that buyers who peruse the Web for listings before spending time with an agent take about two weeks to make an offer, compared with seven weeks for the offline buyer.
The issue now is whether the wider availability of data online makes the process less costly. Despite the proliferation of real estate information sites, broker fees have been largely unchanged for decades. The average commission remains 5% to 6% of the sales price.
Vince Malta, president of the California Assn. of Realtors, isn’t worried about Zillow or other sites wreaking havoc on the traditional real estate industry. He views Zillow as aiding consumers in becoming more familiar with their local real estate market. But Zillow won’t replace the local real estate agent, he said -- Barton agrees.
“It’s another tool that buyers and sellers can use,” Malta said. “Every piece of real estate is unique and Realtors provide experience and skill in being able to analyze the information.”
Barton sees consumers’ need for real estate information as ever-growing in an up or down housing market.
“People,” he said, “want to know about this asset.”