Zillow made it clear this morning when it announced its new service for Zillow Offers clients, Zillow Homes, that it’s on its way toward having a hand in every part of the real estate transaction.
The program essentially creates a brokerage within Zillow — an area of the real estate business the company long said it would never enter. Additionally, Zillow announced that instead of pulling data on sales and listings from local MLS feeds, it will now use MLS IDX (Internet Data Exchange) to glean information. The reason? To help “streamline” the customer experience for Zillow Offers clients, they say.
“We’re excited to add another important link in the Zillow Offers transaction chain to offer our customers greater choice and convenience when considering a move,” said Jeremy Wacksman, president of Zillow, in a news release. “At Zillow, our mission is to give people the power to unlock life’s next chapter and we want to help them on their journey home through a range of services that meet their preferences — whether through Zillow Offers or through a trusted Zillow Premier Agent partner.”
The new service puts Zillow, which started as a real estate search portal and has since expanded into iBuyer territory and now sales and marketing, quickly hurtling toward territory occupied by Opendoor and Redfin, as they are looking to hire agents in the three territories where Zillow Homes will launch in 2021: Atlanta, Phoenix, and Tucson.
New Turf For Zillow
“We knew it would eventually happen,” says JP & Associates Realtors founder JP Piccinini. “They are placing themselves to be a direct competitor to Redfin. While it may not immediately impact the traditional brokerage business, the writing on the wall is there: For brokerages, Zillow is a competitor. If you don’t have a compelling iBuyer/swap option in place at your brokerage, you will be left in the dust as a company.”
Piccinini’s brokerage launched an iBuyer program this year that has instant offers as a component. However, the main sticking point for agents is finding Zillow’s toes now clearly on their turf when the disruptor said that they would never do that very thing they are doing now, which is creating a brokerage.
“I had heard about this a while back, and to be honest the writing was on the wall from the minute Zillow announced their iBuyer program in 2018,” said Briggs Freeman Sotheby’s agent Kyle Lyon. “Zillow has stated many times that they are not looking to replace the agent, yet ultimately their actions have proven otherwise.”
Data is The Problem
In fact, Zillow’s worked hard to get agents to sign up for their Zillow Premier Agent program and market leads to agents, Lyon points out.
“During all this, Zillow has data-mined information provided by agents in order to create a disruptive business model,” he said. “So, in retrospect, Zillow is where it is today because of the agents.”
Therein lies the problem, notes Halo Realty Group’s Kevin Caskey.
“My concern with Zillow jumping in the real estate game is based on the inaccuracy of their data,” Caskey said. “If they are specifically doing this for their instant offer platform, many homeowners will be taken advantage of by selling their home at a lower value than it would truly bring if priced correctly by a real estate professional and not based solely on it’s Zillow value.”
David Griffin Realtor Bart Thrasher agrees.
“The big joke in the industry is the ‘Zestimate’ that the public seems to take as truth in many instances. It’s the equivalent of Q Anon,” Thrasher joked. “If their ‘new streamlined process’ is anything like that, count me out.”
Will this affect the luxury market?
“I do not see this affecting the luxury market, where each home is unique, and not geared towards instant offers or agents who haven’t seen the homes,” said Allie Beth Allman & Associates Realtor Susan Baldwin. “I would think this business plan would be better suited for investment properties or homes that are in neighborhoods with more uniformity of building product.”
From submitting an offer to listing a property, service should be key among all price points, Baldwin said.
“Most sellers and buyers – in every price point – appreciate the relationship with their Realtor who is knowledgeable about the market and location, and the service throughout the process that full-service brokerages provide,” Baldwin stated. “The cut-rate or internet brokerages have not been successful in luxury markets in the past for these reasons.”
“You get what you pay for.”
But for mid-priced and entry-level homes? The results could be less than stellar for sellers and buyers.
“Most homeowners want to get the most amount of money for their home at the lowest cost, but ultimately, there are going to be people who feel the ‘instant offer’ method of selling their home is less stressful and will be willing to take less on the sale of their home for that convenience,” Lyon pointed out. “Although 99 percent of the time when we compare an instant offer to going the traditional route, we have found the seller loses 5 to 10 percent more than going the traditional method.”
Opendoor has a similar business model, which seems to parallel Zillow’s, though it’s missing the flat-fee program that Redfin has. That may not be long in the works, cautions Lyon.
“There is still much more info to come from this announcement as they are stating this move is to just support the Zillow Offers program, making it no different from Opendoor,” he stated. “I would not be surprised if a discounted brokerage model is soon to be announced to rival Redfin.
“That being said,” Lyon continued, “you get what you pay for.”