Zillow ‘humbled’ by real estate industry

[sdrealtor]

Seems like our friends at Zillow have quickly realized that selling airline tickets is very different than selling houses. They basically have given up getting involved in the real estate transaction and are simply interested in advertising revenue. They realized what many others have before them. RE brokerage is not very profitable and discount RE brokerages are not sustainable business models. Read for yourself and dont be surpriZed to see Zillow diZappear in a few years having burned $100M of VC money a la WebVan! I wonder what their burn rate is and how they expect to make any money once the eyeballs are no longer so focussed on RE?

http://news.yahoo.com/s/sddt/20060731/lo_sddt/zillowhumbledbyrealestateindustry

[lamoneyguy]

That’s too bad. Their valuations are all over the place, and I never thought they would replace realtors, but they are an interesting and sometimes useful tool. I would hate to see them dizappear.

~lamoneyguy

[anxvariety]

“discount RE brokerages are not sustainable business models”

I like most of your opinions sdrealtor.. but I’d like to see proof of that.

IMO realtors are very little value added.. they are mostly marketing.. something as simple as making a more public accessible listing service eliminates almost all the need and footwork of agents. 6% is way too high.. it doesn’t cost anywhere near 20k to sell a 300k home… lots of profit there.

[sdrealtor]

I just spoke with a manager at one of the largest and most succesful companies in SD. In July, only 1 office out of more than 30 showed a profit! This is a full service company with a Top 3 market share position in SD charging full service commissions. If they arent making money, who is besides a couple of small independents with very low costs.

[anxvariety]

Are you saying HelpUSell isn’t profiting? They are opening offices everywhere, maybe they are reinvesting the profits.. but they have to be profitable.

[sdrealtor]

HelpUSell is a franchise company and how many offices they are open is irrelevant. It has more to do with how good they are at selling franchises than houses. Ask your local Subway owner or MailBoxes Etc. owner how much money they are making. It’s not pretty. Most franchise owners buy a job not a business.

For example, I believe the local HelpUSell office in Encinitas has turned over twice in the last couple years.

[lindismith]

Still, it’s interesting they secured another $25 mil, and people are getting instant Zestimates sent to their phones while out in the field.

Who knows how it will all shake out.

I remember thinking no one would buy a car or a couch online. Members of my own family did both in the last 3 years.

Interesting times for real estate.

[sdrealtor]

Perhaps they found a greater fool!

The reality is there is a ton of venture capital floating around looking for a home.

[an]

Recently, Zillow just had a deal with Yahoo, so I don’t think they’re going anywhere. If anything, Yahoo will buy them out. Yahoo is currently dealing with Prudential I think. But I’m sure one day, we will be able to buy and sell real estate online as well. If you can picture something like Zillow, then if you sign up to sell, they’ll send you a device that will scan your house and create a 3D virtual tour. All that without much cost to either side. Yahoo and such already have huge servers that can store these data quite easily. So I don’t see much cost to them. They can also share the same technology with their other services such as mapping, etc. So, it might not be ready for prime time at its current state (that’s why it’s still in beta), one day, I don’t see why it can’t be.

[rankandfile]

The RE industry in my opinion is akin to a cartel in that they are in control, or trying to gain/maintain control, of the entire sales process of a home. They are currently trying to pass legislation in Michigan to make discount brokerages completely illegal…you MUST pay the full 6% commission! 10 or 11 states already have this legislation in place. Now how’s that for killing competition! I’m sure they are doing it to “protect” the consumer though.

The cold truth is that the times are changing and it’s not a matter of if, but rather when, a home owner or buyer will be more able to purchase a home independently online. Cut out the middleman. Sure, there will still be service providers available for those that don’t want to do the legwork. But make no mistake, the hay days of earning 6% commissions are numbered.

[PerryChase]

I’m rooting for Zillow. I don’t put much credence in their valuation. But I love how they give information such as sales and taxes that was previously hard to obtain.

It think that the more information consumers can obtain on their own, the more they’ll be able to make good decisions.

I remember the days when the only way to obtain info was to contact a realtor who would drive you around and pressure you to buy. Psychology is that buyers feel they owe it to give a realtor business just for driving them around. With Internet technology, a potential buyer can get to know a neighborhood and look around for years before he ever buys anything.

I don’t know about you guys, but when I look to buy anything online, if an items has been on for while, I would not even give it a second look. The same goes for something that is over-the-top in terms of price. I love to see Craigslist items with “make me offer.” Sometimes I get great deals by making a low-ball offer. Most other times, the seller will get offended and say that he has other offers already. But then I see the same item listed again and again with an eventual price reduction back to reality. Internet technology allows the consumer to get a better feel of the market.

Also looking at RE, online listing lets buyers know how much choices there are out there. In the past, the realtor would just show you one sheet of 12 houses and that was it.

I also love ziprealty. Since I signed up on zip realty there were only several properties in my location/price range. Now, I get several emails per week telling me of new listings. The ziprealty agent also doesn’t bother me with useless phone calls. Just the number of ziprealty emails I get lately tells me that the market is down.

I believe you still need a good agent to sell your house, but I would use ziprealty to buy my next home.

We are only at the beginning of changes in how RE is bought and sold. Also my feeling is that coming downturn will be more severe than 1990s because buyers now have access to inventory and information.

[bob007]

why do we need real estate agents if you are familiar with the area ? I think the govt has to enforce rules that allow the public same access to information that realtors enjoy ?

[FormerOwner]

It seems to me that to sell a house the main thing you need is to get it on the MLS at the right price, with a good description and good photos. If you could get it on the MLS at a low flat fee the only other things remaining would be staging the house, screening potential buyers, showing the house, and filling out the offer/counter-offer forms. The escrow company handles most of the rest anyway. Actually, the buyer’s agent would be doing the showing in many cases so the seller wouldn’t have to be there. You’d still have a lock box. Maybe a company could provide a flat fee service that get’s you on the MLS and gives you a DVD and some software and/or forms to guide you through the process. There could also be a 1-900 line that you could call with questions. Maybe there could also be a flat fee up front for providing you with comps and an unbiased appraisal. It could be a la carte. Under the above scenario the seller would be their own listing agent but the buyer could still have an agent, in which case that agent would get whatever percentage commission you specified in the MLS. I’m sure the NAR would try to prevent this from ever happening but I think it’s just a matter of time.

[PerryChase]

Having the government require competition in RE is not a bad idea. We do that for other industries so why not real estate?

I hope the Consumer Federation lawsuit against the RE industry is successful.

[sdrealtor]

I love to hear all the comments about how simple it could be. It just shows how naive you are. The MLS is not a public utility it costs alot of money to support and depends on the fees paid by realtors and other members. I would love to see what would happen when you got sued for non-disclosure of an item and had to defend yourself in a court of law or were ready to move and had closed on a new house only to find out that you didnt fill the contract out properly and your buyer just walked with his deposit and you are screwed. If I wrote an offer on your FSBO house I could take your pants off w/o you even knowing it while setting you up to get sued by the buyer down the road. I wouldnt do it but it’s certainly a risk you take. Is it worth it? To some yes, to others no.

How about getting a book on brain surgery and doing it yourself to save a few bucks? The liability involved in the biggest financial transaction of our lives is huge. Why someone would do it themselves w/o proper guidance or hire an incompetent realtor constantly surprises. Sure there are some who are capable of doing it themselves or who just get lucky, but to believe in the disintermediation of Realtors is rather naive in my book. Zillow with $50M of VC money quickly realized they couldnt do it.

[Author]

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