Look's Like Zillow is Still Teasing the Real Estate Community

Well, it looks like I did not have any takers from my previous Zillow post but it appears that my gut feeling was correct. Nothing really new. Although an Inman Real Estate Connect attendee told me that Zillow was actively looking for “property” and “county recorder” information, again nothing new.

Today, BusinessWeek discussed the Zillow and what they heard at the Inman conference. Here are some highlights from their article:

--He's hoping brokers will be Zillow's customers, not its competitors. "If we succeed," he said, "brokers will use Zillow as a marketing vehicle."

--"We're not going to be like Expedia." That is, Zillow won't act as an agent by earning commissions from sales. One reason: It would require too much skilled staff. "I can't hire enough professionals. It doesn't scale."

--Zillow won't be some kind of national Multiple Listing Service of homes for sale. In fact, Barton said he thinks anyone trying to create such a list is wasting time. The reason: "The Web is the national MLS already. It's happened. You're arguing over yesterday's news."

--It will make its money from advertising on the site (presumably lots of it from brokers)

--Lots of its information will come from users of the site--a model that has been proven highly successful by real estate blogs like curbed.com.

Based on this little clues, I will continue to formulate my opinion of the Zillow business model and hopefully some of you readers can do the same and post them here.

One big clue is that when you have $32,000,000 million (so far) to throw at a problem; you can come up with some pretty good solutions and buy a whole lot of advertising, especially when saving a ton with free buzz like this.

Also, from the BusinessWeek article this was this quote from Barton…

"It's very easy to think, 'Great, he's done all the work and I can earn a big, fat commission on 1.94 weeks of work.' You have to rethink that."

I couldn’t resist commenting on the BusinessWeek blog, which I posted below just in case BusinessWeek does not let it fly…

REALTORS, read this carefully again... "It's very easy to think, 'Great, he's done all the work and I can earn a big, fat commission on 1.94 weeks of work.' You have to rethink that."

I think the most real estate agents need to really need to understand what is being stated here. Traditional "Buyers Agents", REALTORS who work with buyers almost exclusively (who also tend to be the newer agents because easier to sell a “free” service) are in big trouble. Homebuyers don’t expect to pay for the buyer’s’ agents’ services of showing houses and negotiation. Home sellers are tried of paying a big fat commission towards hiring the team that is negotiating against them.

Listing agents (usually more seasoned and experience) who basically drive the commission structure of a real estate deal are competing on price and this will continue to do so… especially if Zillow creates a reverse bidding auction format for real estate services. The commission this is being cut is the "buyers agent". These agents in turn will show only houses that are offering a bigger commission. Buyers on the internet will become frustrated at the fact that they are not being shown all homes by these buyers agents and will start contacting the listing agents directly, thus allowing listing agents to further discount their prices. As this downward pressure on the commission structure continues the weaker agents and real estate companies will be forced out of business. With this, you will see a continued growth in alternate business models, such as discount brokers, ala carte and the “for sale by owner”. Additionally, the major real estate franchises are too busy trying to keep their “franchisee's” happy, so they are not focusing on this growing threat. The NAR is pretty busy with the DOJ and the sheer financial resources of the companies working at addressing the opportunity (or problem dependant on your point of view) far exceeds the investments being made by the NAR & traditional brokers.

So as the story goes, the real estate community keeps on being teased and they don’t like it… while some of us continue to play along with the tease and build our own mental pictures of what’s behind the veil.