Data-driven technology companies are changing the way that buyers view properties. At the 2014 ULI Spring Meeting in Vancouver, panelists examined the contributions of three real estate platforms: Zillow, Walk Score, and Redfin.
Krishna Rao, an economist with Zillow, said that his company was founded to improve the way people once had to shop for homes. “It was like a dark room in which your agent had the only flashlight,” he said. “We wanted to give consumers access to the universe of properties for sale, and to use technology to demystify the home-search process.”
Starting with data from public records, Zillow expanded to the point where it now provides data on some 110 million homes in the United States. The point all along was to make this information freely accessible to the public. “Data want to be free,” said Rao. “If you don’t make [data] free, someone else will.”
But how does Zillow make a profit? Describing itself as a media company, Zillow earns revenues from ads on its website—from real estate agents, lenders, and others—as well as from strategic partnerships with other organizations.
One organization that partners with Zillow is Walk Score. Cofounder Matt Lerner said that his company is “the best data provider for what’s outside the four walls of a property.” The company’s mission is to make “walkability” one of the things that people look for when they are looking for a for-sale or rental home.
Before there was Walk Score, Lerner said, “we would hear real estate agents say things like, ‘This home is really walkable; it’s right on the golf course.’ ” Now, he noted, people can search any U.S. address to find out its walk score. Properties are rated on a scale of 1 to 100, with anything above 90 being a “walker’s paradise.” Walk Score has recently added transit scores to its database, pulling information from more than 300 transit agencies, as well as bike scores.
“We’ve worked hard to get our walk score information onto other real estate sites, and now some 30,000 sites including Zillow use it,” Lerner went on. As a result of Walk Score, not only are people paying more attention to walkability, but it also has become an important benchmark. Homes with high walk scores tend to have very low rates of default, and each extra walk score point has been shown to add $2,000 to $3,000 to a home’s value in most markets. It works like an outsourced sales and marketing team.
The next step, said Lerner, is to make it possible for people to search for homes by walk score, commuting time, bike score, and so on. “For too long, real estate search engines have been stuck on price, number of bedrooms, and other simple factors,” he said. “We want that to change.”
A different business model is used by Redfin, which is a real estate brokerage with an online, map-based search portal. Redfin has a team of salaried agents throughout the country. Kate Knight, who spoke at the ULI panel, recently launched Redfin Builder Services, dedicated to “reinventing real estate” for developers and urban homebuilders. “We provide an outsourced sales and marketing team with great technology,” she explained.
So what’s next in big data and technology in the real estate industry? The possibilities are endless, it appears—predicting future rental rates, anticipating borrower defaults, sourcing land, and more. One attendee asked whether there were such a thing as a surfeit of data. The panelists’ collective answer: bring it on.