Psst.  I’m going to let you in on a little secret.  Zillow is a technology company and not a real estate fiduciary.  Might this matter to you as a consumer?  You tell me.  Real Estate Agents are licensed by the state and are required to represent buyers’ and sellers’ best interest.  Zillow, on the other hand, is not licensed and doesn’t have to be licensed.  Here’s some little known facts.

Zillow sells leads to real estate agents and that’s just one way they make money.  Through Zillow, Agents can buy percentages of market share in a zip code.  Say for instance that Zillow gets 100k unique inquiries about homes in a zip code.  One agent could buy 5%, 30%, or any percentage of 100k if it’s available.  Last year, I paid just over $3,800/mo for leads in two zip codes.  From the consumer’s point of view, agents aren’t required to have sold any houses.  Consider that you might be getting a complete novice.

Many people incorrectly assume that the agent listed on the home on Zillow is the listing agent.  This isn’t necessarily a correct assumption.  If the listing agent is not a Premier Zillow Agent (aka a Zillow paying member), then that agent’s information will only show up far down on the page.  It can matter when a new listing appears and as a consumer, you call one of the agents appearing next to the listing and the agent to whom you are speaking doesn’t know anything about the property.  They may not have even seen it yet!

Another area that has been debated extensively is Zillow’s estimate of value. Zestimates have caused consternation inside the real estate community and by consumers at large.  There have actually been lawsuits over Zestimates believing that their estimated value has harmed the seller’s ability to sell.  People believe that the Zillow Zestimate is accurate for the value of their home but even the CEO, Spencer Rascoff, has gone on record stating that it’s Zillow’s version of an estimate of value.  The interesting part of this is that a homeowner can influence the Zestimate by adding in features.  One seller client I had last year was disappointed by Zestimate he saw and how it fluctuated weekly so he started adding features to his home and was able to manipulate the value up by several thousand.  So if you can manipulate the data, how accurate is it?

Lastly, there’s a new opportunity for Zillow (Redfin and other tech companies) to make money without the agent getting in the way.  If you didn’t want to pay an agent to sell your house, you can get an instant offer from an investor.  The important thing to remember is that investors want to make a profit.  They aren’t interested in you making a profit.  Here’s how it can work.  You offer up your home on a website such as Zillow to put it out to their investor community and the interested investors will provide an amount they’d be willing to pay (usually in cash) for your home.   This can be a great boon to people who are selling a house of a deceased parent when they are located in another state or people that are hoarders who can’t get their homes market-ready.  The cost to doing this is that the investor is going to pay you far less than you could get on the MLS so they can make a profit.  Say for instance your house could sell for $450,000.  You might get investors giving you offers of $350,000.  You’ve saved a commission, but you might lose $100,000 in value.  There’s also nothing to say that the investor can’t sue you for something.  Zillow or any company putting this together has no obligation to protect you because they aren’t required to be licensed.  They are just creating a marketplace where there’s a willing buyer and seller.


I’m not bashing Zillow.  It’s an innovative model that provides value, but as a consumer you should know that Zillow’s profit model is not necessarily in your best interest.