If the Zillow purchase of Trulia comes together, and Zillow wants to further their dominance without creating a standard brokerage, how could they do it?
There are 17,488 dues-paying agents who are members of the MLS in San Diego County. There are at least another 5,000 assistants, admin people, supervisors, managers, escrow and title people, inspectors, appraisers, etc.
Let’s round it off and say there are 23,000 real estate people in San Diego.
Last month there were 3,111 closed sales of all residential types in the MLS.
Do we need 23,000 people to close 3,111 sales?
No, and the inefficiencies in the real estate selling business are everywhere you look, and most are related to inexperience – realtors don’t sell enough to be really efficient at it.
This is where Zillow could politely commandeer the industry.
In Part One we saw how the agent-rating feature would help to weed out those who don’t sell much. Zillow would partner with the higher-producing agents and sell them advertising. It will work great for all, and if that’s as far as it goes then it’ll be better than it is today.
Kill Shot 2
But what if Zillow wants total dominance? Here’s how to do it.
Hire the best 100-200 of the 23,000 people involved with selling SD real estate every day, and set up the Zillow Sales Desk.
Those on the front lines would be experienced realtors who have closed hundreds of sales in the last few years. They would be taking inquiries from 7am to 11pm, and the rest of the staff will do ‘transaction coordinating’; which gets the sales to the finish line.
The Zillow Sales Desk could be positioned as a help desk for realtors and consumers alike – a place to get answers, and put deals together. A non-threatening place to fill in the holes skipped over by the high-producing agents (the do-it-yourselfers, and low-cost properties).
Today’s realtors accept that you don’t need a realtor to buy or sell. We offer convenience, and we’re the only place you can get good help.
The Zillow Sales Desk would provide an alternative place to get good help. If the Sales Desk charges flat-fees and/or fee+small percentage, it would be even more attractive.
After a couple of years of providing great help, the Zillow Sales Desk could grow into the best alternative for the money.
In Australia, there are no buyer agents, and the transactional brokers get around 2%. If the market here goes the same way, then the agents could just hand over the buyer and seller to the Zillow Sales Desk for completion.
The general public doesn’t realize the difficulties of closing sales – it’s part of the mysterious cabal. But once there is a competent solution to the back end, all buyers have to do is find the right house, and they will have somewhere to go to get it done.
Having great agents handling the initial inquiries is the key. When the buyer finds the right house, they want to get quality help to clinch the deal.
It would bring a predictable solution to the equation, which is also part of the existing cabal – consumers don’t know what to expect from the other parties involved, and are hesitant about how to proceed.
Call the Zillow Sales Desk to get good help!
It’s a long shot, and I don’t think they will do it because the profit vs. hassle is questionable. But if Zillow’s goal is domination, then this idea gets them on the path without being a regular brokerage.
Curious Jim – the $6600 you pay Zillow annually – how many of the leads that have come from Zillow to you have you converted into actual sales income?
How many times have you refreshed the listing page of your zillow listing and seen realtors you’ve never heard of come up on the front page with dozens and dozens of “homes sold” when you know full well they do zero business?
I would venture to guess the buyout, if approved will go down as just another repressed interest rate, sloshing liquidity driven financial loss for investors in a few years when the next financial crisis comes and we all know it’s coming whether you deny it or not.
Jim, Zillow targets Realtors not home buyers. Zillow needs Realtors buying the leads, or else they would be out of business. Zillow would never get rid of agents (Unless they turn into Redfin). Check out 1:30 and 4:54 of this video http://www.bloomberg.com/video/does-a-zillow-trulia-deal-make-sense-DqyauMvQRIuJ3EkuaUq31g.html. Zillow has a “room full of guys calling realtors”. Why would Zillow want to risk getting into the real estate game when they have a confirmed buyer already? (The buyer is the agent/realtor). Zillow would then have to be held accountable for their not always accurate “Z” Estimates. Zillow does not focus on the home buyer, their game is to only sell ads to agents. If you as an agent happen to close after that, then great. But those leads you are buying is like gambling. Some might pay off, some might not. But once the Casino (in this case Zillow) gets your money, no bets (or leads) are guaranteed. Zillow has the law of large numbers on their side. With enough home buyers visiting their site, and enough agents paying for the “leads” eventually someone is going to buy a house and an agent is going to close a deal. Zillow does not screen and groom their leads. If Zillow did, than they would pull a Redfin and become a real estate broker.
23000 vs. 3111? You’d think that kind of oversupply would drive down transaction costs. Goes to show just how screwed up the business is that it doesn’t.
Let’s see how this merger plays out before assuming it’ll be the end of Realtors handling transactions or the start of collapsing fees. I doubt either will happen.
how many of the leads that have come from Zillow to you have you converted into actual sales income?
Zero.
But I haven’t been getting enough great listings lately (at least not yet!) to be round-tripping them regularly. That is the Zillow benefit – listing agents exposing their new listings directly to the buyers.
I do get a few buyers who call from my face being on other agent’s listings, but they typically have a specific question for the listing agent, or are in the bottom half of the price range which is fine and I convert them to potential clients. The high-end market is not being reached by Zillow, Redfin and the like, from what I can tell.
Tony,
Don’t underestimate Zillow’s killer instinct. They have one, and might exercise it more in the future.
I said at the bottom of the post that I didn’t think they would because of the hassle being huge to get into the agent business – read all the way to the bottom.
This article is total trash. End of Realtor by Zillow? Never. Zillow and trulia have some of the most inaccurate Data available, not to mention, who will represent clients? People pay for service, people pay not to get screwedby having someone on their side. There will always be a need for agents. No technology will change that.
Welcome broker take a look around while you are here.
Great discussion Jim. I just bought a house for the 3rd time in my life with the first being in 1998. With all of the advances in technology, the process has virtually been identical each time. The only “innovation” this time was Docusign and that was used by only 1 side. This merger could really help streamline things.
OT – I lived in LaJolla in 2008 – I wish I could’ve met you in person!