Thursday, April 03, 2008

Zillow: Free leads for lenders, but some risk

Zillow has now launched its mortgage offering, which is more of a social network for borrowers in search of a loan than anything else. The company will allow lenders who pay it a $25 fee to provide free information to lenders interested in a loan, subject to certain rules.

The news is getting plenty of play around the blogosphere. I don't want to go over the same ground, but a couple things spring to mind that should be considered by any lender that chooses to work with Zillow.

First, Zillow reserves the right to work with an unnamed third party to perform due diligence on a lender before allowing admission to the network. Part of this work will involve "checking standard sources for complaints or comments." Not sure what these sources are, but should something bad come up (say the lender was sued by ACORN or something), then instead of gaining access to free leads, the lender could be saddled with the stigma of "banned from Zillow!"

Secondly, in order to get access to borrowers, the lender must create a public profile and accept any and all comments from the community. Most lenders don't have community managers for their own Internet lead generation efforts, but now any lender that works with Zillow will basically be opening up a big storefront where anyone who wants to bash them can do so publicly. Who will respond to this on the part of the lender?

Finally, Zillow will advance a code of conduct that all lenders will live by, requiring them "to be
accurate, professional and law-abiding in all interactions." Lenders are already required to be law-abiding. I'm not sure if they need another "regulator" to ensure that they are accurate and professional. And what if Zillow, responding to public feedback, determines that a lender isn't living up to the code. What if, say, a lender doesn't offer subprime loans in a certain urban area where borrowers really need loans? Is that grounds for banishment? Some members of Zillow's public may think so.

Zillow has done an amazing job of creating value online in an area in which others have failed. This move may be taking their offering a bit too far. Unless they just get ungodly traffic, in which case all bets are off and they can make their own rules.

2 comments:

Anonymous said...

Hi Rick, it's David G from Zillow.com.

The $25 fee is unrelated to quoting lenders. Rather, it's an application fee that covers the cost of our confirmation process for adding lenders to the marketplace. All leads are free.

There would be no stigma attached to a lender whose application to join the marketplace is unsuccessful. The reason being that applications (and their outcomes) are anonymous.

You seem to misunderstand how lender reviews work. Anyone cannot bash any lender publicly on Zillow. Borrowers can only review and rate lenders that have quoted them and who they have contacted regarding that quote. i.e. borrowers rate lenders they've worked with on the strength of their service, not on how competitive their quote was.

Zillow is not a mortgage regulator. Zillow is the gate-keeper for the Mortgage Marketplace. Lenders who abuse that system will be removed from it. Obviously not being able to quote a borrower is no grounds for removing a lender.

I hope that clears up this confusion. Please, check it out and let us know what you think!

Rick said...

I will, David. Thanks for the comment.