Zillow and Trulia went and got married over the weekend.
The idea of them becoming a brokerage is another topic, and they would be swinging for the fences there – it’s probably not going to happen, at least not in the short-term.
But their marriage does set up the Big Showdown:
Consumers, Top Producers, and Transparency
vs.
NAR, Big RE Corporations, Low-Producing Realtors and the Status Quo
The Big Showdown has been brewing for years, and Zillow/Trulia will have to pick a lane. They are trying to sell the marriage as a mutual benefit for all, but it’s not. One side wins, and one side loses.
The fight centers around educating the consumer.
The Status Quo (the cabal) likes to keep consumers in the dark. Zillow/Trulia slipped in when no one was looking and grabbed our listings, produced a better website with more information, and went on a spending spree of TV advertising over the last couple of years. They provided better transparency of our listings then realtors were willing to provide themselves, and based on results, the consumers dig it.
But having the listings out in the open isn’t enough to dismantle the cabal.
The RE Cabal, defined: The group of entities that thrives on low-producing realtors. The National Association of Realtors and local associations collect the same dues whether an agent sells a house or not. The big corporate franchisors enjoy more-favorable commission splits from new, inexperienced, and lower-producing agents, and if they hire them by the thousands, they can make a good living. The top producers demand 80% or 90% (or more) of their commissions, and even though their volume is higher, the small percentages and lack of control doesn’t sit well with the corporate bosses.
What happens now?
Zillow has already been forming partnerships with the bigger brokerages; here is an example from last month:
http://investors.zillow.com/releasedetail.cfm?ReleaseID=856350
SEATTLE, June 24, 2014 /PRNewswire/ — Zillow, Inc. (NASDAQ: Z), the leading real estate and home-related marketplace, and Douglas Elliman Real Estate, one of the largest real estate brokerages in the nation and New York City’s largest residential brokerage, today announced they have entered into a new strategic marketing partnership.
Other big corporate franchisors will likely plead with Zillow for a similar ‘strategic partnership’.
If Zillow takes their money, won’t they be indebted to the Status Quo? The Status Quo hopes so, because it will slow down or stop Zillow from continuing to expose the transparency needed to break the cabal.
If Zillow takes the high road, and is beholden to no one, then they would be free to educate the consumer on the intimate details of buying and selling homes. The Status Quo doesn’t want that – they prefer it to be mysterious so consumers end up with the agents on bad commission splits. Literally, the Status Quo prefers you to be served by those who are least qualified to help you.
More transparency would include agent-ranking and demonstrations on why consumers should work with a top-producing agent. You pay the same or similar commission rate, you deserve to get the best help available.
I see the dance as being whether they seek to go professional and attract professionals or whether they see more skim from the keller williams churn burn and spurn mill.
My guess is that they will play to both sides and consumers might get a little more than they get now.
Interesting analysis:
http://online.wsj.com/articles/zillow-to-buy-real-estate-rival-trulia-1406551333?mod=pls_whats_news_us_business_f
I want to see consolidation of the horrible, horrible escrow process. We had a miserable time with that whole part and there was nothing any of the agents or lender could do about it.
That’s the part that angered me the most as a buyer.
The big easy money is in advertising. I doubt expanding beyond that is imminent.
I really don’t see how Zillow/Trulia can lead in any way to “dismantling the cabal.” Zillow and Trulia are just two more Internet advertising companies, and real estate listings are how they draw in eyeballs. At worst this may actually *hurt* consumers by creating a monopoly that reduces competition and raises costs. But this will have no effect on the transaction side of the business. And transparency on the Internet is an illusion, much promised, but always corrupted. I’m sure there will be plenty of ways to game the system of realtor ratings, some by promulgated by the rating vendor itself (for the right price). The two biggest barriers to improved efficiency in the real estate market are the huge amounts of money at stake, and the fact the large majority of customers conduct so few transactions that they never learn the issues.
No? Are you open?
We haven’t really defined what ‘dismantling the cabal’ actually means or looks like, but I’ll know it when I see it.
Here’s the change to look for:
Trulia has been doing it already – I get one or two emails a week that are helpful hints about buying and selling. But they are like all the rest, lightweight and puffy.
When you start seeing effective, hard-hitting advice from Trulia and Zillow – especially on how to select a realtor – then you know the game is on.
I don’t think they will do it. I think they will collect big checks from the big RE corporations and be indebted to them for the duration – and nothing will change.
Jim, excellent observations. I maybe in the minority, but Zulia presents somewhat of a conundurm. The information and marketing channel they make available to the public will ultimately empower the public to need agents less and less. The less they need agents, they less they will pay agents, they less there is left for Zulia advertising. In essence, their own success will put them out of business.
Agreed, but it would take a while for that to happen.
Things that could happen sooner:
1. Realtors stop flow of listings to portals.
2. Zilia joins the Status Quo, formally or unwittingly.
3. NAR rises up (OK, that’s a long shot but technically possible)
For anyone who thought Move and realtor.com might be humbled by their failure to keep up, think again. Check this quote from our arrogant, smug leader:
http://www.inman.com/2014/07/29/move-ceo-on-zillow-trulia-merger-we-like-the-comp/
They don’t get it – they still think they are relevant. 😆
History has proven itself time and time again, constantly improve, constantly change or have someone else come and eat your lunch.
Just a decade or so ago, I remember buyers had to huddle around the green screens of agents, just to see what was on the market. Fumbling through Thomas Bros guides, to see where the listings were…. Completely at the mercy of the most incompetent and sometimes unethical agents.
Fast forward today, and I can see what is on the market, pending, sold, recent comps, who sold it, how many days, $/sq ft between ( redfin, zillow, movoto…) without leaving my couch.
Additionally, that unethical agent I never really trusted, I can see his track record, http://www.movoto.com/agents/
Progress.
We’re not quite there yet though – Movoto shows me working for some other broker I’ve never heard of, and I asked them six months ago to fix it and they never did.
The merger is the biggest newspaper in a 2 paper town buying its smaller rival. I wouldn’t extrapolate too much from it.