Zillow – the U.S. equivalent of a Rightmove, has insisted for years that it had no plans to emply its own agents. But this week the giant, Seattle-based, portal did just that – opening its own real estate brokerage.
The scope of the new operation is, for the time being, limited. Zillow Homes will be acquiring and listing properties for the company’s home purchasing division, Zillow Offers – which cash-purchases properties directly from owners without them hitting the open market.
Competing with venture capital-backed Opendoor, the online listing portals of Zillow and Redfin are betting the future on this digitally brokered ‘home flipping’ or ‘ibuying’ as it’s called in the States. Apparently Keller Williams and Realogics, two of the country’s traditional residential property giants, are also getting into the sector.
So far, ibuying accounts for around just 0.5% of U.S. home sales, but that small percentage apparently amounts to £8bn in capital values.
Errol Samuleson, Zillow’s chief industry development officer circulated a video to real estate brokerages explaining the move as being in part to streamline Zillow Offers. He said that sellers using Zillow Offers have found the company’s current system of relying on third-party estate agents to facilitate the transaction ‘confusing’ in some instances.
Given that the home flipping division currently loses $6,939 on each home sold (according to Zillow’s quarterly financial report) it is easy to see the attraction for the company if it can ditch paying other agents to handle the sales.
Zillow is denying that its real estate customers would lose out as a result of the portal becoming a direct sale operation for the Zillow Offers properties but, given that, just as over here, it is the real estate customers (i.e. estate agents) who provide the bulk of the portal’s revenue and inventory, it’s no surprise that the news has not been greeted with total enthusiasm in some quarters. It is inevitable that some will think the move is the thin end of a very big wedge. How long before the owned brokerage expands into general real estate transactions, leveraging the huge reach and reputation that Zillow has with the public?
Online reactions included:
“You built a business off the backs and pockets of Realtors. Now you turn your backs on us and do everything you can to replace us. Thank God for the Houston Association of Realtors which allows us in Houston to not need to feed the beast we funded, now trying to replace us.”
“Interesting that this guy talks about other brokerages and agents as ‘partners’. Out of the several hundred agents and brokers I know, pretty much all of them despise Zillow. I wonder if their agents will be as tone-deaf when they try to represent buyers and sellers. Should be swell to watch the chemistry between that client and broker, like a **** in a punch bowl.”
“The Gates were opened and the Trojan Horse just rolled in.”
“A lovely presentation, but Zillow knows that so many agents dont need them anymore. There are 20 different CRM operations that can help us target sellers to find business. The days of extorting us are over, hopefully.”
Watch the Samuelson video – and think about how Zillow’s move will be watched by the likes of Rightmove, Zoopla, OnTheMarket, and all the impending U.K. challenger portal operations…