That doesn't mean the market can't get still more efficient, but having a nice presentation of public data is definitely worth appreciating.
I'd also add that real estate agents can provide substantial value. Many don't, of course. But buying a house is an enormously complicated transaction, with a lot of legal, financial, and material complexity. Buying a business is even more tricky. To me it's similar to having a lawyer: there are good ones and bad ones, and sometimes you might not need one at all. But they're not pure waste.
Why?
Where I'm from, buying a home is a few pages at most. You need to put down the buyer, the seller, the object, the price, the down-payment and the date.
Same for getting a mortgage from a bank, it's a page of contract, and a page of terms and disclaimers. You need the buyer, the object, the mortgage amount, the date, and the type of mortgage.
(The trick, of course, is that where I'm from, the general proceedings of buying a home is regulated by law, so the only thing that needs to go on a contract is the specifics and deviations from the norm.)
I get that you'd like it to be simple, but it's coming across like this to me: http://xkcd.com/793/
House is sold as-is. Buyer is responsible for finding all visible issues. Seller is responsible for X years (3 I think?) for hidden issues. Done.
> radon testing
Buyer is responsible for testing. The city can tell you if a certain area is at-risk. Sellers usually provide long-term testing results. You can add a clause to the contract stipulating that if radon level is higher than X within Y years, cost of fixing is split between seller and buyer by Z.
> title searches
What is that? googles Oh. No, we have good public record-keeping, you don't need to pay third parties to trawl decentralized piles of unorganized records.
While Zillow is ultimately doing the same thing, I think they can eventually position themselves strong enough to start wedging agents out of the process. One of the huge issues is that the MLS listings are the go-to source for information. If you want to buy a house that's in MLS, or want to list your house for sale in MLS, you gotta play ball with agents. Since MLS is such a dominant marketing tool, they're able to maintain the archaic, but profitable, agent system. If Zillow, minus the MLS, becomes a strong enough marketplace for homes, you'll have viable competition to MLS.
There are already flat-fee MLS agents out there, where you control the commission on the buyer-side and pay a flat fee on the seller-side to get into the MLS listings. That's a decent hack for sellers right now, but it's still just a small improvement on a crappy system.
Vast majority of them are stuck in the past (think 1990s) and their only competitive advantage is restricting access to information. A typical real estate agent (with very few exceptions, I'd guess <5%) is adding little to no value to the transaction and is simply taking a middle-man fee. They are in general petrified of places like Redfin, Zillow and Trulia and they do anything in their power to maintain the current business model. Generally it involves limiting access to "their" data and coming up with whatever legal roadblocks they can use to defend against other sites.
The agents
However, they are sitting on an absolute treasure trove of data which would be amazing in the hands of the right people.
I sold my house using one of these services in 2011. I saw seller agents adding zero value outside of MLS, so I just paid what it cost to get on there. Buyer agents are actually a little more useful to their clients, but ironically, the seller has to pay them as well. When you do flat fee MLS, you specify on the MLS contract what % of the sale will go to the seller agent. I actually don't know if you can write in "0" or "0.5" in that box on the contract, but I know for sure you don't have to write in the industry standard 3% (standard is 6%, with 3% on the buyer broker/agent and 3% on the seller broker/agent).
In my experience, we did not need to do anything that required an agent. The paperwork is mostly prepared by the buyer's loan company and then a title agency handles the rest. Paperwork like the purchase agreement is basically boilerplate and I had a lawyer review ours just to be sure.
The lawyer cost me $50. That plus the flat-fee totaled less than $600, saving me thousands on what I would have payed if I had to send an extra 2.5-3% to another agent.
For Zillow 2014 Q1 it was $46.2M realtor revenue, $7.1M mortgage leads and $12.9M display advertising. Only about 20% of their revenue comes from ads.
As an end user (albeit a window shopper so far), the map-based searching on both Zillow and Trulia is really nice. Map-based searching on Redfin feels kind of clunky and slow by comparison.
Trulia and Zillow do have the best meta-data on houses though. School info, crime, purchase history, walk scores, etc.
They're looking to flatten the home-selling process and cut out inefficiencies. More here from one of the co-founders:
http://www.quora.com/What-can-be-said-about-Keith-Raboiss-ne...
As a consumer, I think I should oppose Zillow. They seem to just take public data, present it nicely, and slather it with advertisements. Real estate agents play the same heavy-handed role they always have, except now they have to give some of their profits to Zillow else lose visibility to their competitors.
I'm more excited about Redfin. Redfin makes shopping for a home closer to the self-service experience it should be, with agents dealing in higher volume with lower margins playing a lighter role. Unlike Zillow, Redfin seems to make that market more efficient, and I think that's the bigger opportunity for capitalization.