Friday, July 22, 2011
Zillow’s IPO and other Real Estate Sites
I’m sure that anyone who has done any “real estate Googling” has come across Zillow. They are a company based in Seattle, founded in ’05 by some pretty bright minds that previously had a hand in Microsoft and Expedia. Basically they are a database that includes 100 million homes across the United States. And although current homes on the market are a big part of their search results, in addition they give value estimates of homes, by offering several features including value changes of each home in a given time frame (Zesitmates), aerial views of homes, and prices of comparable homes in the area. Where they can access appropriate public data, it also provides basic information on a given home, such as square footage and the number of bedrooms and bathrooms. Users can also get current estimates of homes if there was a significant change made, such as a recently remodeled kitchen.
They are currently in third place for the highest ranking real estate sites behind Yahoo and Realtor.com, and despite the fact that they have never shown a dime of profit, (in fact last year they lost 6.8 million) they seem poised to seize the online real estate market. There are others, like Trulia and Realbird, but the big players seem to be these three.
Doubters are calling this another example of the beginning of the Dot.Com Bubble 2.0, and in some ways I agree with them. What exactly is Zillow selling? Well information I suppose, and that is what brings me to my point, and why I have an issue with websites like Zillow.
Real estate listings are a sought after commodity for agents and brokers. It is the product that drives each brokerage. Besides the obvious that you need a listing so you can sell it and make a commission, listings are used to show other potential sellers how successful a company is, they are used to lure in buyers, and a yard sign with your name on it is free advertising screaming to the neighborhood “Look at me. I am a real estate agent.” Listings are the life blood of any successful real estate agency.
Well once you get a listing, the pressure is on to find a buyer. Sellers want to know that you are working hard on their behalf and shouting from the rooftops, so agents scramble around to advertise. However they do not want to spend a lot of money. That is where these piranha sites come in. They very generously offer to advertise your listings for free. The posting process is smooth and easy. Often times they will partner with your local MLS and it can be done automatically. It’s a chummy win-win situation.
Well as these sites have evolved, they have begun to get greedy. They have come up with ways to attempt to get money from real estate agents as well as advertisers. They now offer different programs where you can enhance a listing, or pay to have it bumped to the top of the search results or better yet sponsor neighborhoods or zip codes, all for a monthly fee. Suddenly another agent’s contact info is splashed around on your listing. And all the while they have SEO web people feverishly working to assure top Google placement, effectively beating out local agent’s websites that have freely given them the listings in the first place.
The National Association of Realtors has also efficiently set up Realtor.com so that it holds agents hostage unless they buy an annual enhancement package at an absurd fee. Listings are stripped of all but one photo, and all descriptions are also removed, unless the fee is paid. On top of that, they offer neighborhood sponsorships, and banner ads. The total can be in the thousands. To me this is the biggest travesty. NAR is supposed to be an association that agents join freely to help them do business better and more efficiently. Instead they have basically become a monopolizing bully. It is akin to the protection fee you pay a crew from Canarsie. I suppose you could operate with out it, but without the MLS, few agencies could survive.
I don’t begrudge the entrepreneurial. On the same hand I don’t like to see people taken advantage of, and I think unknowingly we agents and brokers are. And I don’t think most agents realize that we are in a position of power. We have the product, and we spend a lot of time and effort obtaining that product. To freely give to these companies who then turn around and charge us, and compete with us in search results makes no sense to me. If all agents and brokers got together and decided not to give away our listings, the top five real estate websites would immediately fold.
But for now Zillow is worth 950 million, without making one cold call or knocking on one door.
There were five sales reported in the Sullivan MLS this week. Click Here for listings.
My pick of the week is one of the sold listings. MLS 32165. I think this sale is an example of our market stabilizing and perhaps even picking up a bit. It is a nice early 20th century farmhouse with a bit of land, and some seclusion. This house would appeal to a lot of second home searchers. What caught my eye was the days on market, and the original list price. (165K and 103 DOM) A few years ago, a house like this would have been priced at 200 plus K, and would have sat at least a year, with begrudging intermittent price drops. This one was a quick, efficient--list it and sell it. I think this is a good sign.