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From Zestimates to Zilloans – Zillow’s Magic Hat Trick

I hear Zillow is venturing into the mortgage world. Zillow insiders have told me that while they can’t divulge the details they have an awesome mortgage in the works. Wow! In fact, I’m going to call it Zilloans.

Ever since I heard about Zilloans, I’ve been fantasizing what it could look like. Mmmmmm……. Now, to be honest, my critical mind says, if their Zestimates can’t be trusted then what makes you think their Zilloans will be any better? But, I digress.

My interest in Zilloans is a bit personal. I’ve been originating home loans for a few years years now. In my years I’ve learned that it takes a lot of skill to do this business well and not screw homeowners out of their dreams. I hope that Zillow understands this part of the mortgage. Also, I hope they understand that the mortgage interest rate is not the deal maker. If Zillow doesn’t understand these two pillars then the whole thing is over before it even begins.

ZilloansSo, given my experience in the home loan business, I wanted to see if I could imagine what Zilloans would look like. I give you three possible scenarios.

1. Could it be?…..The Actual Loan Itself?
With the demise of the subprime market and the collapse of the securities market for exotic loans, the industry is left with Fannie/Freddie, loans, VA/FHA and a few major portfolio lenders. I’m not sure what kind of spin they can put on these vanilla loans that would make it awesome.

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I know they won’t be able to tinker with the fundamentals of the loan like Debt to Income Ratios (DTI), credit scores, documentation requirements or down payment. We all know what happened to lenders that played around with the fundamentals.

The other option would be to negotiate variances with the GSE’s on such features as income disclosures for self employed, or, second home purchase standards etc. But, from what I know you’ve got to be willing to take some serious risk and have plenty in the bank to obtain an approval on such variances.

I don’t want to sound like Charles H. Duell, who, as head of the US Patent Office in 1899, said the Patent Office should be closed because “everything that could be invented had been invented”. Still, I’m hard pressed to find ways Zillow could truly distinguish itself when it comes to the actual loan.

2. Could it be?…..The Interest Rate?
Maybe Zillow will have the lowest interest rate on the planet. 2% with no closing costs and all that good stuff. The low cost leader. However, anyone who plays that game will tell you the interest rate game is a tricky one. The margin on this is so small that any deviation can kill you. But the lager question is, since when did having the lowest rate ever differentiate anyone and create a long term business?

That is because the only way the rate card works is through bait and switch. Burn! Not only that, nowadays, this is a legal minefield if there ever was one. Additionally, Zillow surely knows that skilled loan officers across the country know how to sell against the lowest interest rate, so it would be very difficult to see Zilloans surviving with lowest interest rate strategy.

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3. Could it be?…..The Online Process of Finding a Lender?
“When banks compete you win”. Really? Or did I miss something here LendingTree? How about Ditech? Or “LieTech” as most everyone says. Ouch! Having said that, being the go-between is probably the strategy most likely to succeed. The sites I’ve mentioned above could definitely use a bit of competition. Furthermore, if Zillow is able to make the loan search process easy and quick for consumers then it could very well gain traction with the consumer

For Zillow, this strategy also has the added benefit of being able to charge the participating lenders a fee. The fee can be a gatekeeper of sorts. But, in the long run Zillow will need to do quality checks with the consumer. They would need to do a Zpinion Request (Opinion Request) and solicit some serious feedback from consumers. If they can pull this off, the online “find a lender” strategy could be truly amazing for them.

These are only three possible ways that Zillow could roll out Zilloans. There are more possibilities involving the mortgage process and also consulting related. However, these functions are already served by the lending institution and it would be redundant for Zillow to provide them.

If you can think of other ways in which Zillow could come up with Zilloans, please feel free to add your thoughts in the comments box below.

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Written By

Writer for national real estate opinion column, focusing on the improvement of the real estate industry by educating peers about technology, real estate legislation, ethics, practices and brokerage with the end result being that consumers have a better experience.



  1. Todd Carpenter

    November 3, 2007 at 3:24 am

    I’d be surprised is Zillow did any sort of origination or servicing of loans. They don’t sell houses, why would they loan money?

    I agree that the key to being a successful go between is to find a model that does not focus on rates.

  2. Benn Rosales

    November 3, 2007 at 1:50 pm

    I’m not going to say they wouldn’t do it, but I would ask the question- why? I’ve teased them about Zillow Agents many times, and they’ve said over and over again that that is not their intent- to sell real estate. If thats truly the case, then why bother with lending?

  3. Benn Rosales

    November 4, 2007 at 1:34 am

    This is the first time in history that David G didn’t come by at the mention of Zillow…

  4. Drew Meyers

    November 5, 2007 at 1:15 am

    Don’t worry – I’m sure David read this; he just didn’t comment 🙂

  5. Benn Rosales

    November 5, 2007 at 3:32 am

    not worried, just noting…

  6. Patrick Hake

    November 5, 2007 at 4:05 am

    If they do decide to get into the lending business, will they be required to use Zestimates instead of appraisals?

    I believe that would be called putting their money where their mouth is.

  7. Shailes Ghimire

    November 5, 2007 at 3:34 pm

    I agree with you Todd. I would think they turn out some kind of Lending Tree type website.

    Benn – why? Well, I think there is money to be made in successfully exploiting the Internet. I don’t believe it has been done to the extent it could.

    Patrick – that is a very thought provoking scenario. Let’s imagine a situation where a borrower wants to do a Cash Out Re-finance. This borrower bases his decision to proceed based on the Zestimates. I don’t know of any lender that would base their decision on these Zestimates – so when the appraisal comes in ($400 later), they borrower realizes that it’s not worth proceeding. Then what?

    Very thought provoking!

  8. Athol Kay

    December 1, 2007 at 1:45 pm

    I keep saying that Zillow should get into the Appraisal market. That would end all the bitchin’ about zestimates right then and there.

    “Here’s our ballpark zestimate”


    “If you really want a precise formal appraisal, we have trained licensed appraisers nationwide”.

    Then zillow takes Drew Myers and makes batches of shiny Clone Trooper appraiser guys from his DNA and sends them out with laptops and cell phones to do all the appraisers.

    Seriously, Zillow could have a franchise/lead sending system in place for appraisals extremely easily. It’s a perfect defense for the zestimate as a starting point, and a natural lead in for an an appraisal sale.

    The only difficulty with my plan is holding Drew down to get DNA samples. He’s kinda squirmy.

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