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Zillow is a Broker – So What?

By |2018-05-03T21:22:45+00:00June 21st, 2017|Main category|0 Comments

“Berkshire Hathaway Home Services, NRT, Redfin – all brokers. Do brokers drop out of IDX because they are selling homes in their market? Brokers share their listings with these large firmszillow logo everyday. If Zillow joins the list, what’s the diff?” This is the conversation starter that an investment banker had with me today.

I appreciate having conversations with people in the capital markets. Bankers see the world differently. They believe that markets shape themselves and that great companies lead markets. Perhaps Zillow Group has its heart in its current service offerings today. The company protests against becoming a brokerage, but everyone got very upset recently when they launched a pilot for Instant Offers that seemed broker-like: it’s a program whereby Zillow helps investors buy property by submitting offer letters directly to homeowners. Brokers don’t like it. Some agents really like it.

The pilot is in its early months and restricted to a couple of large cities. Inman News reports that it has not translated into any investor purchasing any homes yet. Perhaps the pilot is a bust. On the other hand, the way the pilot was designed has an added component of delivering leads to Premier Agents. Instant Offers gives the consumer a choice – take the offer from the investor, or connect with an agent to get information about listing your home. News reports indicate that agents are getting listing leads, so the pilot is not all lost.

An important thing to keep in mind when companies like Zillow test, is that innovation sometimes goes awry. Innovation sometimes produces different outcomes than expected. Zillow has been masterful at driving consumers to their websites and generating buyer leads. Now they may have stumbled upon a new way to generate seller leads more successfully, and that is their job!

The investment banker made a statement that was crystal clear: “If Zillow Group’s Board of Directors believes that it is in the best interest of stockholders for Zillow to open a brokerage, or a mortgage bank, or a title company or whatever…. that is what the company will do. For now, they are doing great with the track that they are on.” P.S. Zillow surged past an $8.5 billion valuation and closed at $46.76 today (a market cap of $8.6 billion). The company is doing very well.

Will brokers go nuclear if Zillow does become a broker?

The only nuclear option for brokers is to dismiss online advertising as a strategy. If Zillow becomes a broker, they will have access to IDX. So for that matter, brokers seeking to cut off Zillow will need to dismiss IDX. Another option would be for the MLS to change, and that is hard to imagine. The Department of Justice would step in quickly if the MLS tried to create rules that disparage the business model of any brokerage (see VOW rules, read your history about ZipRealty and Redfin).

The truth is that brokers are in a bad position today. The nuclear option is not really an option. It would cause a complete rethink on how brokers display listings online. The construct would be a lot like the automobile industry or existing new home market. BMW would not display Honda listings on BMW.com. But I am not sure that would work either.

Zillow is big. Get used to it. They are in a much better position to shape the future of real estate than any other company or group of companies. Zillow is driven by consumers first, and the feelings of their advertisers second. As long as consumers keep showing up and advertisers continue to drive revenue growth – they will be in good shape.

I posit this:

If Zillow becomes a broker – and refers out the business like a relocation network – would you turn down the referral? Would agents?

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