I Feel the Earth Move

It had been awhile since I checked out what real estate site Zillow was up to since its free and noninvasive "Zestimate" housing appraisals threatened to derail peskier lead-generating sites like HouseValues (Nasdaq: SOLD  ) .

Now, as Stephen Ellis points out, the 10-month-old site is rolling out some new features that aim to threaten more conventional real estate brokers, not to mention sites like Move's (Nasdaq: MOVE  ) Realtor.com and IAC/InterActiveCorp's (Nasdaq: IACI  ) RealEstate.com.

No longer content to be merely a site that provides a free ballpark estimate of what your home is worth, Zillow is evolving -- and it's always dangerous when a disruptor starts sprouting new appendages.

The slow crawl toward change
You may be intrigued by the ability to post your home for sale or the "Make Me Move" feature, which could encourage even an uninterested seller to dream big and see if an outrageous offer comes along. But if so, you aren't in the majority.

According to the site, just 7,838 homes have been listed for sale, and 4,289 home owners have submitted a "Make Me Move" price. Yes, it's still early in the rollout process, but how can one resist when Zillow offers up free listing tools? It's like Craigslist, only with a prettier, dedicated, and more intuitive interface.

Enjoy the silence for now. Revolutions start slow. Franz Ferdinand -- the archduke, not the band -- was just one guy.

Maybe the new features don't seem like that big of a deal. A platform for crazy offers? The ability to allow homeowners or their contracted Realtors to upload photos and descriptions of their digs?

These aren't necessarily breakthroughs in user interactivity. Reply.com lets folks make unsolicited buyout offers on any home. ZipRealty (Nasdaq: ZIPR  ) took a bold step earlier this year by allowing folks to comment on home listings that they have visited.

The catch here is that Zillow's popularity is booming. The site is drawing between three million and four million users a month. Rather than bogging visitors down with registration pages or credit card forms, the site is completely ad-supported. The localized "ads by Google (Nasdaq: GOOG  ) " units that populate the pages remain the top money-maker for the site.

Advertisers are welcome to buy banner ads on the site, of course. Zillow offers the delicious benefit of targeting your ad by ZIP code. However, for the most part, Google's ability to serve up valuable and relevant ads is greasing the Zillow engine. That inspires Zillow to devise more ways to attract folks interested in real estate.

With great listing power comes great responsibility
Are all these tweaks infallible? Of course not. The free flow of information may be liberating at first, but will it come at the expense of accuracy? Will folks talk down a house on ZipRealty in order to have the owner accept a lower bid? Will insane "Make Me Move" entries eat away at Zillow's credibility? Is there a way to claim 1600 Pennsylvania Avenue and make a political statement mockery of any of these Web 2.0 real estate sites? Sports fans, get ready to razz your rival's home turf with verbal desecration!

However, shortcomings and potential pitfalls will only slow the revolution. Just as comparison shopping sites have pulled back the curtains of established industries, the old-school real estate industry can't survive if it doesn't address the "by owner" movement that has been made cheaper through Google Base, Craigslist, and now Zillow.

Once you open the floodgates of information, there is no turning back. Agents like Realogy (NYSE: H  ) are going to have to compete against the wild freedom of free-listing sites or even the more prolific fee-based sites like eBay (Nasdaq: EBAY  ) . That may not upset the balance of commission fee schedules overnight, but what happens when a 6% slice becomes a 5% cut, and then a 4% sliver?

If Zillow has this kind of disruptive power while it's still teething, just imagine what will happen when it hits those terrible twos.

HouseValues has been one of the rare clunkers in theHidden Gemsnewsletter service. eBay is aStock Advisorpick.

Longtime Fool contributorRick Munarrizisn't interested in selling his home, even if he recognizes that the once red-hot South Florida market is cooling off quickly. He does not own shares in any of the stocks mentioned in this story. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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