NEWS

A One-Stop (Online) Shop

New York Times
April 13, 2008
By Bob Tedeschi





MANY Internet users are accustomed to going to Zillow.com to see a rough approximation of their home’s value. Now the site is offering a way to find mortgages.

Early this month, the company introduced a mortgage service that, analysts believe, could help borrowers save money and, perhaps, protect them from multiple calls from aggressive lenders.

“This is one of those things that may not be good for mortgage brokers generally, but it will be good for consumers,” said Rob Atkinson, president of the Information Technology and Innovation Foundation, a Washington-based research institution. “I like the innovation.”

The service, found near the top of Zillow’s home page, is somewhat similar to one popularized by LendingTree.com, through which users enter financial details and loan preferences, and receive offers from prospective lenders. On Zillow, users enter slightly more detailed information, including their credit score, but not their name or any other identifiable information.

For those who do not know their credit scores, Zillow offers a rudimentary scoring estimator from Credit.com. This may be an imperfect tool, however. For one recent user, the estimate understated a credit score by more than 50 points. A more reliable, but costlier, method is to visit the Web site of a major credit bureau and pay for one’s score. Equifax, for instance, charges $16.

Zillow circulates the borrower’s information to a network of more than 1,100 brokers and lenders, who are free to submit offers. Prospective borrowers may receive these offers by e-mail or log onto Zillow to read them and contact, either by e-mail or telephone, the lenders or brokers.

That process, according to Zillow’s chief executive, Rich Barton, cuts down on sales calls. “In focus groups, we heard an earful from people who said they thought about changing their phone numbers because of all the calls they got after filling out a form on some site,” he said.

Mr. Barton added that since a borrower’s application on Zillow is highly detailed, and lenders must provide Zillow estimates of all loan processing fees, “consumers can compare apples-to-apples quotes from lenders.”

Unlike LendingTree, which charges lenders a commission for providing them with prospective customers, Zillow charges lenders and brokers a one-time fee of $25. Zillow uses the fee to cover the cost of a background check on the businesses.

Mr. Atkinson said that because lenders pay no commission, and because they compete against other lenders for business, borrowers should pay less.

One potential area of concern for consumers is that “when it comes to brokers, you’re not exactly sure who you’re dealing with,” Mr. Atkinson said. “The risk is that if Zillow ends up with some bad apples, it could affect the system.”

Mr. Barton of Zillow said the company would ban any lender or broker who breaches the site’s code of conduct, which prohibits bait-and-switch tactics, among other things. The site is also promoting an evaluation service; it will enable borrowers who have interactions with lenders and brokers to leave public feedback about those businesses.

Brad Strothkamp, an analyst with Forrester Research, a technology consulting firm, said the site can help borrowers save time.

“What I like the most is the opportunity to integrate the home shopping and home financing process online,” he said. “That’s the way it works in the off-line world, where I work with a real estate agent, then that agent hooks me up with a broker.”