Well, after much anticipation, Zillow has launched their Mortgage Marketplace. In typical Zillow-style, they are doing things in the reverse of the lead generation industry which generally has benefitted the consumer, which is to be applauded. In a nutshell, Zillow’s Mortgage Marketplace requires the consumer to go to Zillow, fill out a form that is similar to a mortgage long form found on LendingTree or LowerMyBills. The consumer is REQUIRED to register with Zillow to receive bids. The mortgage information is anonymousely sent to registered mortgage brokers and banks on the site. These mortgage brokers and banks then respond to the consumer with offers. It is the then up to the consumer to follow-up with the mortgage broker to get more information. Consumers rate the mortgage brokers based on their responses and service.
The Positives: In general, like most things that Zillow launches, I think it is a pretty bold service that will result in great value for some consumers. For consumers who want to fill out a mortgage request and receive bids and spend the time to follow-up on those bids, those consumers will likely save some time and get a good deal. Assuming Zillow is able to build a significant market of mortgage brokers who are willing to respond to lots of different types of loans (which is the challenge in mortgage – all brokers and banks want the same loans), consumers should win through a competitive bidding process. If the mortgage brokers were able to see how their competition was bidding and then drop their fees even further, that would be really interesting.
The Challenges:
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For the Mortgage Broker: The Zillow Mortgage Marketplace reminds me a lot of the HomeGain Agent Evaluator product that HomeGain launched with in 1999 or 2000. It was a pretty innovative product that went against the grain of the industry. Of course, HomeGain was charging a referral fee and Zillow is not, it was a challenging product in that it required the real estate agent or sales person to do a lot of work upfront before receiving contact information or having a strong sense if the lead was qualified or valid. Lead generation as a marketing medium is challenging in that the sales person must follow-up with the leads to really understand how qualified they and on what time frame the person is going to be buying – really buying, not just what they put info into the form. With the Zillow Marketplace, the mortgage broker must do a decent amount of work upfront before knowing whether they can even compete for the deal. I can see a % of very motivated and hard working mortgage brokers using the Zillow Marketplace, but I think the fall off in participation will be significant if brokers feel it is not a good use of their time to respond to inquiries versus their own web sites, direct mail, or purchasing leads.
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For the Bank: Those who have managed a mortgage lead gen business know that the business revolves around the large mortgage brokers and banks that have massive call centers that need to be productive. The keys to these call centers are highly qualified leads and VOLUME, VOLUME, VOLUME in a very narrow set of loan parameters or filters. Zillow Mortgage Marketplace is doing something very different than the way the mortgage industry currently operates. LendingTree launched in 1998 and the mortgage industry has been adapting to working LendingTree leads over the past 10 years. Now most banks have large call centers dedicated to working mortgage leads. It has taken 10 years. Assuming that Zillow can drive significant volume of mortgage inquiries, Zillow will need to invest in coaching the large brokers and banks on how to operationalize this kind of marketing to get them to be interested and successful. If Zillow can not drive significant volume, I doubt the big banks and brokers will participate at all.
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For the Consumer: BankRate and many of the reputable lead generation firms like LendingTree and LowerMyBills spend a significant amount of time and resources on assuring ethical lending practices, fraud prevention, and preventing predatory lending. Zillow should easily be able to address this, but consumers should be wary of the different participants in the Zillow Mortgage Marketplace, especially initially until the mortgage rating system is viable.
Zillow continues to be an amazing company. In real estate, Zillow gives the home valuation information away for free making up the the gap between the $1-3 banner ad CPM in real estate and the $250 lead gen CPM with volume of consumer impressions. Now in mortgage, they are giving away free leads to mortgage brokers and banks. Those leads when monetized by 3 lenders are worth close to $200 a lead. I assume Zillow is planning on long-term relationship with the consumer and targeted banner advertising opportunity at a CPM ranging from $30-90 on sites like BankRate.
Regardless, Zillow is fun to watch. My five year ARM is coming to a close and I submitted a lead on Zillow. Can’t wait to see what happens.
Modelry 