ZIP, Zillow and ZAP – Part 1 of ?

OK, let’s “Get Real” for a minute.

On the one hand we have the consumer who wants what they need, no more; no less, for a price that seems reasonable.

Now, let’s look at the “service providers”, both as you know them, and as I know them as an insider. From an insider’s perspective there are three tiers of “service providers”. The traditional full service model, the “discounted” full service model and the stripped down to “you are mostly on your own” model. None of these are “good” or “bad” in and of themselves. It’s more a matter of what is good or bad for you, depending on your skills. But that’s for another day. Just wanted you to know that each of these is good for someone. Only question is which is right for you.

Technology has added a fourth option that is not a “model” in the “service provider” sense, but one that many consumers at present are opting for, which I will call ZAP.

I have to use analogies because I am somewhat limited by my insider position in discussing commissions and companies. Straight shooter that I am, being a little vague is not my normal modus operandi, so bear with me. Hopefully my descriptions and analogies will be obvious enough for you to follow. If not, you can ask questions in your comments or by email.

Let’s discuss and eliminate the ZAP option first, since it is not a “service provider”, but a place where many consumers get trapped without knowing that they are getting ZAPPED. It is worth mentioning here that ZIP is not a ZAP. Now back to ZAPs. The most obvious ZAPs have a button that says “Find a Realtor”, or something of that nature. When you hit that button to find a Buyer’s Agent or Seller’s Agent you are decreasing your ability to negotiate the commission, without knowing it. The technology whizzes who create these websites take a portion of the commission, without disclosing that to you the consumer. They do not provide a service to you, the consumer. They provide a service , for a fee, to the agent who is a “participant” at a cost. There are many of these and we call them “lead generating” sites, “bottom feeders” or “troll” sites.

Let’s take a specific example of how these work, and there are many of these available to you. Let’s say you are a buyer, rather than a seller, of real estate. You go to look at property on one of these sites, which is how they reel you in. You then hit the “I need a Buyer’s Agent” button and are connected with an agent. Let’s say based on the price of the house you will eventually purchase, that the commission will be $9,000 as pre-set by the seller of that house when he listed it for sale in the mls. When you connect with the agent by hitting that button, you have generally spent in that process of merely hitting a button on the website, the money you could have negotiated toward your closing costs or repairs or against the purchase price.

The agent who “gets you” has paid for you. He pays for you out of the $9,000 on the table in your “transaction”. Sometimes he pays it up front in a monthly cost of say $1,000 a month. So if it took three months for that agent to “get you ” (“the lead”), he has paid $3,000 for you. When you try to negotiate something for you from the $9,000, the agent has already given $3,000 to the 3rd party ZAP company, and so you get zapped, as your ability to negotiate has been diminished or entirely eliminated without your knowledge.

Some other sites are not “pay as you go” for the agent, but “pay as you close”. In that case the agent will owe the ZAP a percentage of the commission, if and when you close escrow. Again, the monies you may have been able to negotiate with your agent have been sucked up in advance without your knowledge.

Some of these sites operate like the one sided mirror glass of an interrogation room that you see on shows like Law and Order and the like. I find these lead generating “Big Brother” website options to be exceptionally creepy, but hey, that’s technology at its “best”, I guess. When you sign up to the site to view and save property, you are assigned to an agent in the queue without regard to whether or not it is a good match. Those who have paid in to “look at you look at property”, get the leads kind of like the way a lottery ball pops up to the top and gets “pulled”. I’m trying to give you the facts without editorializing, but it’s difficult for me as I find these sites intrusive and deceptive.

OK, back to facts. The agent who “wins you in the lottery” of the moment, gets to see everything you are doing from the inside without your knowing he is watching you. He can see what properties you are viewing. He can see which ones you are saving vs. ones you are trashing, he can “get inside your head” a bit. He gets all of the info you have put in to register for the site. You then get an email from him, and maybe a phone call, saying “Would you like to go see X property”? You are dumbfounded and amazed and think he is absolutely clairvoyant! Or maybe you DO want to see that property and don’t think about how he “guessed” you might want to go see that property and you just go see that property without a second thought.

LOL OK, I can’t stop editorializing, can I? Don’t you find this just absolutely creepy? Maybe it’s me. I’ll stop here for today and will continue after some of you comment on this so far. Maybe it’s just me. What do you think? I’d like to hear from you before I go any further. After 5 comments I will go to Part 2 of ?

As to the Title of this entry, let’s review. We are mostly talking about ZAPs that ZAP you, the buyer consumer. ZIP is NOT a ZAP. While you all sit at the edge of your seats awaiting Zillow and it’s wonders, we’all (the insiders for lack of a better term) are sitting back expecting another exploitative ZAP type. Of course “No one knows, but the Shadow”, but at least know what to look for when it comes. My expectation is that it will not give you what you want. That being “What you need, no more; no less, at a reasonable cost” as noted in the second sentence of this entry above. (Someone let me know if that IS what the consumer wants, please. Thanks.)

But it will WOW you with it’s technology, reel you in, and then sell you off to the highest bidder. No one knows yet, but if you hear anything new about it let me know and I will decipher the code.

Five comments from YOU, the reader, and then we will move to the actual means a buyer has to negotiate their commission, unless they have already “shot themselves in the foot” by being totally or partially ZAPPED without their knowledge, from the ability to negotiate.

Have a good day! Look forward to hearing from you!

Ardell

17 thoughts on “ZIP, Zillow and ZAP – Part 1 of ?

  1. Pingback: Southern New Jersey Real Estate News, South Jersey » Blog Archive » Real Estate Lead Generating Companies

  2. All realtors get there leads from somewhere, why would going through the internet be any different. It has in fact proven in many industries to be a more efficient and cheaper way to do lead gen than traditional means. A realtor can buy residential lists, do an expensive 4-color direct mail, pay for adwords to their own site/microsite, buy outdoor billboards or park benches, etc.

    Just because it’s a different form of lead generation shouldn’t have any bearing on your ability to negotiate commission.

    A savvy realtor will go w/ their cheapest and best-converting method of lead generation. Streamlining their process should make the buyers cheaper also.

    I don’t follow your logic, it doesn’t jive with some basic marketing & economics principles.

    …but i do look forward to hearing your response and followup.

  3. I’m not sure I follow, but I’ll help you get to 5 rsps…

    Doesn’t the buyer ALWAYS have the ability to negotiate? Wouldn’t they just use a different agent if the “lottery agent” was beholden to some prior contract? The KEY value connected to the website has already been consumed…the search.

    And yeah, I’m with you, spyware and spam are crappy ways to cultivate clients. People don’t like the secret spying. Plus, the initial premise that people will click the “find me a realtor” button seems very sketchy–cold, dimwitted leads. Any data on the likelihood of search to referral to closed deal?

  4. Well Joe, I’m not sure I’m following you either.

    If the person who is searching doesn’t go see and buy a property with the agent who is peeking in at them, no harm; no foul.

    The issue isn’t “true” negotiating per se. It’s more like, if you have a home inspection and something is wrong, but the seller won’t fix it but you really love the house… If the agent weren’t paying the lead source, they would be more likely to fix that for you. That’s the “normal” type of fee negotiation for a buyer.

    The agent is more willing to pay for things for the buyer if their commission wasn’t already cut by the lead source, without disclosing that to you, the buyer.

    Ardell

  5. Ardell,

    I couldn’t agree more with what you have written. I also agree with what Darren said about ROI and lead generation… that this is just a new method of getting leads.

    What I think you mean, and what I feel as well, with these lead generation websites can’t really be explained with numbers…or research…or any real logic….

    they just seem to suck.

    I mean they are good at SEO and PPC and yada yada… and they trap all these leads… I just think that business models such as these will ultimately fail once the RE professionals catch on with their own ways of getting online leads….and as online consumers mature.

    The teenagers who have grown up with the internet all thier lives WILL NOT click on any of these gimmicky “sell my info/find me a realtor” schemes.

    I think the next gen. of lead generation will be sits such as what Dustin, his wife and yourself are doing here in this blog. I think the internet users of the future will start to see that this “find me a realty” foolishness is doing no one any good. That is unless you just really want to waste an hour meeting some bozo buyers agent who has never even been to that part of town at a Starbucks for a free coffee.

    If i was in Seattle and looking for professionals to help buy or sell RE a big part of my online search would involve blogs like this one. So you guys keep up the good work.

    Speaking of new online models i better get back to mine or we will all be stuck with lead gen. sites until we are to old to see the computer screens.

  6. Ps. Dustin,

    Ardell showed us quite a new (yet simple) trick…. Write half a post, and then have a call to action for comments or you don’t get the second half.

    Simple and brilliant!

    “No Soup For YOU!!….Next!!!” -The Soup Nazi

  7. Giles is absolutely right. The “click” lead generation is crap.

    Re: (whoever posted in my rsps…hi:)
    If clients are shopping for dogs, agents should *definitely* tell them about available dogs. Agents who don’t show their clients what they’re looking for are stupid. If the click strategy drives these bad agents to fast food industry employment…GREAT;)

    (Request…when commenting could you please use a different field than my comment…that way I can see who is commenting, when, etc…thanks)

    Re: Ardell Rsps.
    If I were the buyer I would use the site solely for search. If I did use the click button and the agent seemed constrained and wasn’t provding the service level I expected, I would call somebody else.

    It sounds like you are describing a scenario where buyers can expect an agent to pay them some of the commish back in the form of washers and dryers, inspection fixes, etc. If this isn’t explicitly negotiated, the buyer should have no expectation. The only party that percieves this as important is the agent that feels less able to lavish unannounced gifts on buyers.

    There are very few cirumstances that I can think of where buyers should expect maximum value from anonymous, click generated referrals.

  8. Thanks for the response Ardell.
    So really with your post you are educating buyers to get a word of mouth referral to a real estate agent – since you will have more room to negotiate? That makes sense to some extent, but wouldn’t the agent who is kept busy from their “free” leads not need to negotiate commission? I would think a well established realtor that doesn’t need to market themselves would also be reluctant to negotiate with you. Kind of a catch 22.

    Is this not your experience?

    disclosure: I used to work for a value-add (sorry for the buzzword) lead generation company in a different industry. I have mixed feelings on where they belong in the food chin

  9. Apologies, Joe and others, on my “bad blogging etiquette” responding inside your comment. I am really excellent at real estate, but I am new to this blogging thing (started my blog 1/1/06) and I am a Grandma! Doing my best. I’ll get the hang of it.

    I’ll answer anything you ever wanted to know about real estate if you help crack my knuckles and get me into shape in the blog etiquette category.

    Deal?

    Ardell

  10. I have to say i agree with what you are saying Darren…. The big agents who get tons of word of mouth referrals seem less likely to me to take a discount than some anonymous click through agent that someone found and has no allegiance to via the referring party.

    life is such a catch 22 isn’t it?

  11. Darren,

    The problem with the lead generating site is not that an agent pays for the lead, but that he pays for it with the consumer’s money (the way I see it anyway). That should be disclosed somewhere. In fact it might be required by law to be disclosed, if the owner of the site were subject to “our” rules.

    Think of it kind of like the warning on the side of the box of cigarettes. I think a lead generation site should have a warning that reads: “If you hit this button you may be spending thousands of dollars!, without KNOWING it! (I know,, I’m shouting, get used to it, I’m Italian)

    As to the rest, what you call “negotiating” and what I call “negotiating” are two different things. I will post that shortly under “Take the Money and Run – Part 2” and then we’ll talk some more.

    Great comments BTW!

    Ardell

  12. I received this one in an email:

    Hello
    I was a bit confused by the article. I didn’t understand what ZIP was even though you referred to it multiple times. Without understanding what ZIP is, it was hard for me to contrast ZAP against ZIP.
    I was able to see what ZAP means regarding how by going through a site to get the housing information I am handing that information to the middleman, who happens to run the website then decides to match me up to some unknown realtor somewhere that has paid to be on the rotation.

    As a consumer though I am curious how to find a good realtor. Referral is the most common way to find a realtor but more often than not people don’t recommend realtors they may have used in the past. It seems stumbling on someone on a website may not be quite as bad as walking into an unknown real estate office and getting some unknown person there. Perhaps in a future post you can put down a bit more about why walking into an office to get a realtor that one doesn’t know is better than getting a realtor from the internet.

    Hopefully part 2 will come out soon and then I will know what ZIP means.

  13. Joe,

    You bring up a good point, Joe. How come when agents are saying “there’s nothing on the market”, meaning they wouldn’t sell those dogs to their worst enemy or they are overpriced, they sell? Is it because people who search them on the internet and bring a “Find An Agent” agent, buy them up, while we are all waiting for something “good” to come on market to sell to our best clients. Food for thought.

  14. Hi Darren,

    Remember that while I am fairly well versed at technology and the internet, I am kind of old. Leads should come to you, the old fashioned way, because you are good at what you do. This makes you strive to be one of the best at what you do, so people will refer to you. If you do not get business that way and need a lead generating source to get business, maybe it’s time to look in the mirror and improve the way you are handling things for your clients. Someone who has been in the business any length of time and has to keep paying for leads, is doing something wrong.

    Given that my ex was a CTO, we moved around quite a bit for awhile. But even with all of that moving, I was able to generate leads by being knowledgeable and adept at my craft.

    Is the lead generating model only for new agents? If it is, then how is it good for the consumer to only get to pick from new agents or agents whose clients don’t give them repeat and referral business?

    I’m a little confused by your response, as you were confused by mine. Sometimes this “flat medium” is a bit difficult. Want to try that again?

    Ardell

  15. Pingback: Seattle’s Rain City Real Estate Guide » Microsoft vs. Google a real estate perspective

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