It’s been a day trying to interpret and predict the future of the real estate industry. Good grief! Jeff Farris of BubbleLife Media reminded me that seven years ago, we didn’t have a verb called “google.” I was just getting an iphone. I started a “blob” called DallasDirt!
We think maybe in another five to seven years, we may have a verb called “Zillow” or “Zulia” as in : did you Zillow (or Zulia) that house?
What this means to the real estate industry: Zillow, now married to Trulia with a pretty sizable dowry, will have much more money, efficiency and power than the splintered MLS’s across the country. As Rob Hahn pointed out: they did a $3.5 billion deal that united two real estate giants in 6 WEEKS! Speed kills the competition.
They may have more power than the NAR. Zillow and Trulia are beloved by consumers, easy to use, and consumers will turn to them regardless of how inaccurate their data is. Why? Because Zillow has become a media company that entertains while it encourages real estate voyeurism. It can reach millions of people — eyeballs — in a single bound!
Don’t I know it: people love House Porn!
What does that mean for Dallas Realtors? Better re-shape your spending of ad dollars. You really don’t need print, really. You are not jipping your clients without it. Agents tell me over and over how they never sell a home from print ads but — no one wants to let go. Or they advertise in the artifacts of paper that only geriatrics read just to show the seller they are “doing something” for their listing. It’s a placebo, and an expensive one.
Some say the united company/companies could raise ad prices on agents. After all, they almost have a monopoly. Zillow CEO Spencer Rascoff, rubbing his hands, says he thinks the companies now are only grabbing 4% of the Realtor’s ad dollars — and Wall Street thinks there is $28 billion in ad revenue at stake.
Consumers? Maybe this brings us closer to buying homes on line, “uberizing” real estate to eliminate the middleman. Wait ’till I tell you about “OpenDoor.com”. Real estate commissions could be lower, but you also may get so damn much information your head will swim and you’ll be more confused than ever. Think of it this way: we have three great grocery stores almost within walking distance: Central Market, Whole Foods and Tom Thumb. Sometimes I buy milk at 7-Eleven because I don’t want to go into the store and see everything I don’t even begin to need!
Is Zillow — or, Zulia — the next Amazon, as Jim Cramer called it? Experts I’ve read say no — Zillow isn’t selling anything — at least not yet.
But Amazon is the wrong analogy. First of all, Amazon is a lot more dominant in its space, recognized in some parts as the “most favored brand in America.” More importantly, Amazon is a retail website — it’s a place you buy stuff. Zillow is not a retail website — it’s a place you browse for stuff. It’s not a “buying” website, it’s a “shopping” website.
Heck, most of Zillow’s visitors aren’t even shoppers, they’re just people who like looking at houses. Zillow had over 80 million unique visitors last month. And for the whole country, we will have about 6 million homes (houses and condos) sold this year.
Brad Inman says — and knows — “the traditional brokerage and franchise industry is losing ground quickly to Zillow and it needs to make some game changing moves to protect their enterprise. Otherwise, they are increasingly boxed in by the big portals at the top and top producing agents at the bottom. Could brokers and, in turn, franchises become the real estate industry’s artifact of the modern technology revolution?”
What he means is that the first most vulnerable are the brokers. The folks who manage agents for a percentage of their commission. Most yearling agents begin with a 50/50 split of the traditional 3% commission, but as agents grow more powerful and get more sales prowess, they keep more of their split so the brokers can keep THEM. Brokers also have to help agents sell, with education, innovation and tools. This costs money. Look at all the new brokerages coming to Dallas, signs you haven’t seen before — like United Realty. Tomas Castellas, formerly of Allie Beth Allman, is the founder of One Realty Group Partners. Many of these are offering agents a chance to keep more of their commission splits. Some offer a menu of services agents can pay for, or not. Don’t forget, most agents are independent contractors and work for themselves.
Second most vulnerable are those who sell lower priced homes. I mean, this could be done through technology. Let’s see, Zillow is a company with $200M in annual revenues, a few million dollars in annual profit, and a $5B market cap. Realogy is the largest real estate brokerage in the country (Century 21, Coldwell Banker, Sotheby’s) and has $5B in annual revenue, $800M in profit, and a market cap just shy of $10B.
What if THEY ALL merged and Zulia became a broker? Oh — stay tuned for the story of Coldwell Banker acquiring Zip Realty.
Still, experts say that even if Zulia has no greater ambition than to “sell leads and lead management tools to agent”, the merger could have implications for smaller and independent brokerages, and affect how they compete with bigger, richer brokerages. I am talking about the Coldwell Bankers, Century 21’s, Re/Max es and Berkshire Hathaway HomeServices.
Circle the wagons?
Maybe. Bigger brokerages and franchisors could negotiate advertising perks and volume discounts for their agents that smaller firms can’t compete with. Those “listing enhancements” give brokers and agents greater visibility on search portals, and prevent those hated shark ads (agents at competing firms) from popping up alongside listings. In other words, the big boys could afford to PAY Zulia to keep sharks out of their ads, keeping them clean. (I know, this seems like extortion.) But this is already happening at Coldwell Banker.
Century 21 has been subsidizing realtor.com listing enhancements for its brokers and agents since 2009, adding Zillow the following year and Trulia, Homes.com and Homefinder.com by 2011, providing discounts of up to 85 percent.
In June 2011, Realogy subsidiary NRT LLC announced it had signed agreements to add advertising enhancements to 100,000 property listings on Trulia, Zillow, realtor.com and Yahoo Real Estate (now Yahoo Homes).
When Realogy went public in 2012, an investor prospectus noted the company’s “attractive financial arrangements with third-party websites such as Google, Yahoo, Trulia, Zillow, and others” which provide “significant” advantages for the companies agents and franchisees.
That’s what concerns me: the small, independant agent may find they have to join a bigger sandbox to get some clout to deal with the Goliath. And I just always hate anything that nips at small business.
BUT! Not so fast. Does anyone remember MySpace?
Technology will continue to try and DISRUPT our life. We will adapt to what works, what truly improves our lives and work and is kind of fun, reject what doesn’t. I often compare Real Estate to medicine, where change is also coming at lightening speed. Physicians, like agents, have a big huge X on their back. While medicine will become more de-personalized, so will real estate. Maybe we will have the equivalent of P.A.s in real estate. But there are many consumers who would prefer someone look them in the eyes and TALK to them when they are diagnosing, or advising on the most expensive investment of a lifetime.