What is the point of low-balling rates on Zillow?

They shoot themselves in the foot based on a churn and burn theory.  In other words, who cares if they repeat or referral buiness, they got THAT one.  (I see it in the agent side too!)

After seeing quotes that are from lenders who are "out of the area" and don't know the local market, which local markets might be a part of "declining" market restrictions etc, it seems to me that to benefit the consumer, Zillow should limit quotes to lenders from "those states" at the very least.  Additionally, there are licencing laws for brokers and some banks that don't allow for them to close loans many states.  This does not benefit the consumer. 

One more thing, the new FHA loan limits and conforming jumbo loan limits make it critical the lender know the specific location and the loan limit associated with it.  Another reason to limit out of state lenders/chop shops from making quotes in areas they aren't familiar with.

Sarah,

First couple of days the rates were respectible, then suddenly everyone started to quote rates at PAR or lower.  (and a TBW PAR rate).  I'm suprised at the lack of action from it, I filled out quiet a few quotes before everone started to work for free, and I think I've had one visit to my web site from Zillow, and no calls.  Not sure what I'm doing wrong...  It is such a great idea.

http://www.zillow.com/profile/jonsigler

As of today, the system has been live for two weeks.  So I think people are still in the process of trying to figure things out on the site. 

One of the systems evolving on the site that will help this, is the idea of our rating system.  As people have good and bad experiences with the various LOs, they are able to go into the site and rate them.  Similar to Ebay's seller rating system.  So if a person sees a low rate but a bad user rating, this may make them reconsider their actions.  This system just takes some time to build up and get going, but it should help.

Also, if you ever see anything on the site that you think is flat-out fraud, flag it.  We follow up on all of these and will remove those found to be guilty.  

Jennifer -

It's the same premise that Bankrate is based on - make the lowest offer and you'll get the shopper to contact you.  The lowballers don't want to give the rate they quote.  They're looking to get the contact and then qualify them out of the low rate and into something with more profit.  Yeah, it's messed up.  And it damages our industry.

I think the rating system, described by Sara in the previous comment, will only help a little.  I don't see Zillow Mortgage shoppers using the system like Ebay, where they take the time to leave feedback (because they want feedback, etc).  People don't shop for mortgages like they do for beanie babies.  And flagging is a good concept, but it will be difficult to manage.  And maybe these folks ARE pricing rates at par or close to it.  That's not fraud, but the bait and switch later on is.

I'm interested to see how it evolves.

I double checked some of the quotes provided on Zillow,com by comparing them against the published rates on their websites, and by calling them "blind" using roughly the same scenario that they used to provide a quote for a given situation. I think some if not many "originators" are deliberately low-balling their rates/fees on Zillow.com by pricing them at par, and have no intention of honoring them - even when rates are falling! It might be helpful if Zillow will consider spot checking these quotes, and weed out those who are not being very honest.

I'm curious - anyone know where they can get a 7/1 ARM at 5.625% with with only $1126 in fees (appraisal, credit report, processing, and u/w) and NO points for a $817,500 mortgage on a $1,090,000 purchase (75 LTV)?

Lewis,

I agree that for this to work Zillow must spot check the rates that are being quoted.  I have no trouble with a requirement that we be able to provide proof of how we were planning to offer that rate.  Forward a rate sheet.

I noticed a similar loan to the one you are quoting, refinance a $850,000 loan on a property of $1,262,000.  Anyone have an investor who is doing jumbo's at 5.875% and $0 in lender fees?  If any fellow Active Rainers know who that is with that price today, please pass it along.  I'd like to sign up with them.   If the pricing doesn't get you laughing, check out this quote from the lender "I noticed that the other quote you received was for 5.75% that is for a loan of full doc. And our rate is 5.875% for that product. My company will not and does not condone promotion of the best rate under any circumstance to get borrowers in the door"  Hold on I need a Tums from laughing so hard.