As is being widely announced in the news this morning, Zillow.com and the SeattlePI.com websites have partnered to offer co-branded website property searches. Ironically as of 8am you can find this story on Reuters, Inman News, and of course Twitter and Facebook. But Ironically it is still missing from the Homepage of SeattlePI.com.
The website will also offer Zillow’s other features such as home values, “just sold” data, local market data, etc. As well as their custom real estate community content via Zillow Advice and mortgage rates from their Mortgage Marketplace function.
This raises some interesting issues for other companies, organizations, brokerages, and agents who have property search functionality built into their blogs and websites in order to drive traffic to their sites, and ultimately derive business from it. Rain City Guide is a great example of a website that has recently added property search functionality through M Realty in hopes of garnering more viewers, and potentially a revenue stream as well. Many agents, including myself, have spent years developing websites that we use to attract potential buyers and sellers. Is Zillow now officially our competition?
Strategically this makes a lot of sense for both companies as the SeattlePI is struggling to re-create it’s business model after shutting down it’s printed newspaper version in March. And Zillow has recently been monetizing their searches through selling advertising to agent’s by zip codes.
I wonder what RCG’s readers and contributers think of this turn of events. It’s definately a “game changer”. The question is, what’s the new game going be like, and who’s going to get to play?
Here’s my short answer…I’m not so sure it’s a game changer – Zillow is no longer a member of the NWMLS and only has a fraction of the number of homes listed for sale on its site. Plus, I do recall that one of the local TV station websites had a home search feature that led to a broker’s website, so it isn’t exactly a new concept.
I think it’s a very positive move IF there are no referral fees involved for the consumer. Could be “just what the doctor ordered” for evolving positively as an industry. I’m assuming neither the PI or Zillow is a “bottom-feeder” site that takes 25% of the consumer’s negotiating power (as to commissions) away, for the privelege of use and hitting a button.
Jim, maybe you should bold the last line or paragraph of your post?
I’ve all ready voiced my concerns regarding blogging for a site that is no longer a “neutral” platform now that RCG is associated with a brokerage at both Simon’s and Dustin’s earlier posts.
I’m still waiting to see what ever changes Dustin may have up his sleeve with RCG.
What are your thoughts?
Jim, maybe you should bold the last line or paragraph of your post?
I’ve all ready voiced my concerns regarding blogging for a site that is no longer a “neutral” platform now that RCG is associated with a brokerage at both Simon’s and Dustin’s earlier posts.
I’m still waiting to see what ever changes Dustin may have up his sleeve with RCG.
What are your thoughts?
Jim,
Perhaps I am missing something here but we already have all of our listings on Zillow and since they don’t have a direct NWMLS feed (as Ben pointed out) they don’t have all of the listings currently on the market.
I just see this as one more way buyers might find our listings which is good for our sellers.
Jim,
Perhaps I am missing something here but we already have all of our listings on Zillow and since they don’t have a direct NWMLS feed (as Ben pointed out) they don’t have all of the listings currently on the market.
I just see this as one more way buyers might find our listings which is good for our sellers.
It’s odd that in a year of declining property values redfin, Zillow, and Rain City Guide are scrambling for back end revenue. redfin announced a profit which they toured the blogs with, sent out press releases, and generated as much buzz as possible, but it seems kind of flat considering the selling season.
There is a lot of money that has been spent on web presence over the years and now it seems every body is looking for a return on investment.
In my opinion Real Estate will revert to a belly to belly transaction with buyers and sellers looking for the service of representation. I think a lot of people will realize that, as smart and capable as they may be, a debt of a quarter to a half of a million dollars is real money. For that kind of debt they should get some guidance more than a home inspection.
David-
As to your- “Real Estate will revert to a belly to belly transaction”, I can’t see that it ever was anything else. JG
David – Essentially your point goes back to the fundamental issue of “professional representation” in a real estate transaction. Has the emergence of so many property home-search websites diminished the value of the process that much?
So much of the discussion regarding on-line property searches (my dog is better than your dog debates) focus on the front-end of the process. Certainly, buyers and sellers can do research about home values, neighborhoods, school districts, etc. via the new technology. That’s fine and dandy. In fact, this “democratization” of information is, in my mind, a good thing. It has already helped reduce the cost to consumers in the overall process. However, this is where the benefits end and the “actual costs” begin.
Consumers (and the new-wave business models) fail to recognize that there’s only so much fat that can be trimmed from the cost of purchasing and selling real estate. The high commissions that so many object to are comprised of a myriad of systems: brokerage fees, agent education, licensing, legal fees, agent experience, marketing costs, and one of the largest costs that most forget about: the cost of failure (i.e. when transactions fail to close there are HUGE costs that are accrued within the system). As in any complicated/costly transaction, getting to the store and shopping is the easy part. Actually sitting down at the negotiating table is going to cost you.
I know of very few agents who have successfully run their businesses based on website referrals or on meeting people on-line. It’s similar to the success rate that the unemployed have with on line job-finding services. Ultimately, smart agents and smart consumers will find each other in the good old-fashioned way (if you don’t know what that is……………..get out of the business).
It’s odd that in a year of declining property values redfin, Zillow, and Rain City Guide are scrambling for back end revenue. redfin announced a profit which they toured the blogs with, sent out press releases, and generated as much buzz as possible, but it seems kind of flat considering the selling season.
There is a lot of money that has been spent on web presence over the years and now it seems every body is looking for a return on investment.
In my opinion Real Estate will revert to a belly to belly transaction with buyers and sellers looking for the service of representation. I think a lot of people will realize that, as smart and capable as they may be, a debt of a quarter to a half of a million dollars is real money. For that kind of debt they should get some guidance more than a home inspection.
David – Essentially your point goes back to the fundamental issue of “professional representation” in a real estate transaction. Has the emergence of so many property home-search websites diminished the value of the process that much?
So much of the discussion regarding on-line property searches (my dog is better than your dog debates) focus on the front-end of the process. Certainly, buyers and sellers can do research about home values, neighborhoods, school districts, etc. via the new technology. That’s fine and dandy. In fact, this “democratization” of information is, in my mind, a good thing. It has already helped reduce the cost to consumers in the overall process. However, this is where the benefits end and the “actual costs” begin.
Consumers (and the new-wave business models) fail to recognize that there’s only so much fat that can be trimmed from the cost of purchasing and selling real estate. The high commissions that so many object to are comprised of a myriad of systems: brokerage fees, agent education, licensing, legal fees, agent experience, marketing costs, and one of the largest costs that most forget about: the cost of failure (i.e. when transactions fail to close there are HUGE costs that are accrued within the system). As in any complicated/costly transaction, getting to the store and shopping is the easy part. Actually sitting down at the negotiating table is going to cost you.
I know of very few agents who have successfully run their businesses based on website referrals or on meeting people on-line. It’s similar to the success rate that the unemployed have with on line job-finding services. Ultimately, smart agents and smart consumers will find each other in the good old-fashioned way (if you don’t know what that is……………..get out of the business).
Ardell, what do you mean by “a ‘bottom-feeder’ site that takes 25% of the consumer’s negotiating power (as to commissions) away, for the privilege of use and hitting a button”? How does a web site “take” anything from anybody – does a user of their web site have to enter into some sort of fee agreement before they can hit said button to use the search engine?
I’m confused, in the dark, etc. Please elaborate, so I will understand. (small brain – all full).
thanks, PG
Ardell, what do you mean by “a ‘bottom-feeder’ site that takes 25% of the consumer’s negotiating power (as to commissions) away, for the privilege of use and hitting a button”? How does a web site “take” anything from anybody – does a user of their web site have to enter into some sort of fee agreement before they can hit said button to use the search engine?
I’m confused, in the dark, etc. Please elaborate, so I will understand. (small brain – all full).
thanks, PG
The agents who “service” the people who hit the button enter into an agreement with the site owner in advance of being able to participate in the site. That cost of hitting a button is generally not disclosed. The standard agent to agent referral fee is 25%. 4 referrals = a sale, without doing any “work”.
The number of people who want to earn commission income without leaving their office is growing. If a potential buyer is buying a $500,000 home with a $15,000 RE commission, if they hit that button, they automatically lose $3,750 of negotiating power. When they meet the agent assigned to discuss commissions, there is no longer $15,000, there is $11,250.
These arrangements are part of the reason commissions remain so high. It’s feasible that if all 25% referral fees went away, became outlawed, whatever…that the hypothetical standard of 6% could become 4.5 without any of the people doing the actual work and representation losing a dime. This “fluff” in the system will likely be eradicated at some point by arrangements like the one Jim mentions. If people use a site that does not charge referral fees, but instead simply directs people to agents who participate in the site in some way, the consumer gets the advantage of starting from a full fee basis at the point where they negotiate a fee for service with their agent.
I’ll try to get a commission flow chart post up soon. I’ve been meaning to do that for a long time.
The agents who “service” the people who hit the button enter into an agreement with the site owner in advance of being able to participate in the site. That cost of hitting a button is generally not disclosed. The standard agent to agent referral fee is 25%. 4 referrals = a sale, without doing any “work”.
The number of people who want to earn commission income without leaving their office is growing. If a potential buyer is buying a $500,000 home with a $15,000 RE commission, if they hit that button, they automatically lose $3,750 of negotiating power. When they meet the agent assigned to discuss commissions, there is no longer $15,000, there is $11,250.
These arrangements are part of the reason commissions remain so high. It’s feasible that if all 25% referral fees went away, became outlawed, whatever…that the hypothetical standard of 6% could become 4.5 without any of the people doing the actual work and representation losing a dime. This “fluff” in the system will likely be eradicated at some point by arrangements like the one Jim mentions. If people use a site that does not charge referral fees, but instead simply directs people to agents who participate in the site in some way, the consumer gets the advantage of starting from a full fee basis at the point where they negotiate a fee for service with their agent.
I’ll try to get a commission flow chart post up soon. I’ve been meaning to do that for a long time.
As usual, Ardell hits it on the head- “The number of people who want to earn commission income without leaving their office is growing“. J-
Thanks, Ardell,
The site charges the agent. And, apparently, the people using the site are presumed to want the agent referred by the site to “service” them (what a great expression – brings new meaning to “full service”).
I suppose we should blame the buyer for thinking the agent is free, but we’ve been down that road. Maybe the site should disclose to the searchner/buyers that any agent they “hire” from the site must pay the site a 25% cut?
I do think it is a game changer. Zillow is very cleverly maneuvering themselves to be defacto search portal for all-things-real-estate-related. Zillow is very good at developing mind-share of the industry and we may all wake up and find one day and find there’s a new 800 pound gorilla in the room.
That’s not necessarily a bad thing. We’ve watched the National Association of Realtors squander their Realtor.com opportunities over the years. Perhaps a well-run private company that works to find win-win solutions for both agents and consumers would be a good thing.
I also think that agents are getting VERY TIRED of having prospective buyers and sellers sold back to them through all these website portals and relocation companies that want to “earn commission income without leaving their office”, as Ardell so aptly puts.
The referral fee, which is xx% of the gross commission income, is a cost of doing business that’s paid to the referrer. The referrer is providing a service to the agent. It is simply an alternative business model for agents who don’t pursue traditional marketing methods. Though, it doesn’t necessarily benefit the buyer, but then neither does traditional marketing methods.
The vast majority of agents are commission split agents, where they automatically pass xx% of the gross commission income to their broker. It’s a cost of doing business.
Taking it one step further, then, are buyers who use traditional commission split agents more disadvantaged than 100% commission agents? After all, the commission may likely get reduced to $7,500, so in the example, a buyer has potentially lost $7,500 in negotiating power. Now, I admit, it’s not exactly apples-to-apples, but it’s pretty darn close.
The referral fee, which is xx% of the gross commission income, is a cost of doing business that’s paid to the referrer. The referrer is providing a service to the agent. It is simply an alternative business model for agents who don’t pursue traditional marketing methods. Though, it doesn’t necessarily benefit the buyer, but then neither does traditional marketing methods.
The vast majority of agents are commission split agents, where they automatically pass xx% of the gross commission income to their broker. It’s a cost of doing business.
Taking it one step further, then, are buyers who use traditional commission split agents more disadvantaged than 100% commission agents? After all, the commission may likely get reduced to $7,500, so in the example, a buyer has potentially lost $7,500 in negotiating power. Now, I admit, it’s not exactly apples-to-apples, but it’s pretty darn close.
OK,
There is a lot of stuff here.
Number one is the rebate brokerage of redfin which is a huge new game changer that it seems no one has positioned themselves for. I for one intend to use the rebate against commission for my cleaning, yard work, and painting services. If you contract through us we will rebate you my end of the listing commission up to 50% of the total. I don’t really care how I make my money; from contracting or commission.
Second is the one stop mortgage and zestimate of Zillow. You determine your value through the zestimate and borrow or apply accordingly. With the rebate system I can also offer a rebate on your loan origination fee of 1% by reducing the sales commission.
You have also brought up the referral fees.
All in all the consumer may get more for the price of a commission, but it depends on the agent.
I think any one who meets or agrees to a working relationship with a Real Estate agent, mortgage, title, or escrow service, is in the 3% to 15% category. In a world of billions of dollars each year even a small per cent age makes for huge dollars.
My feeling is that as more and more people realize they have made very poor choices in the purchase of Real Estate that people will look for more qualified people to help them and less of the gimmicks.
OK,
There is a lot of stuff here.
Number one is the rebate brokerage of redfin which is a huge new game changer that it seems no one has positioned themselves for. I for one intend to use the rebate against commission for my cleaning, yard work, and painting services. If you contract through us we will rebate you my end of the listing commission up to 50% of the total. I don’t really care how I make my money; from contracting or commission.
Second is the one stop mortgage and zestimate of Zillow. You determine your value through the zestimate and borrow or apply accordingly. With the rebate system I can also offer a rebate on your loan origination fee of 1% by reducing the sales commission.
You have also brought up the referral fees.
All in all the consumer may get more for the price of a commission, but it depends on the agent.
I think any one who meets or agrees to a working relationship with a Real Estate agent, mortgage, title, or escrow service, is in the 3% to 15% category. In a world of billions of dollars each year even a small per cent age makes for huge dollars.
My feeling is that as more and more people realize they have made very poor choices in the purchase of Real Estate that people will look for more qualified people to help them and less of the gimmicks.
“Taking it one step further, then, are buyers who use traditional commission split agents more disadvantaged than 100% commission agents?”
In a nut shell, yes. But only if the business owner, agent, passes on some of that savings. Say an agent is making $7,500 per on average off $15,000. They can open up their own brokerage, give the client $5,000, and still make more than at the traditional brokerage ($10,000 vs. $7,500), so it could be a win-win for the agent and their clients.
Same as the scenario of approaching the listing agent direct. When there’s more money on the table, there’s more chance some of it will end up back with the consumer. But it’s not a guarantee…until it becomes a stated business model.
I’m not averse to referral fees that are actually a split between agents who share in the services to the client. But 25% just shooting off the table because someone hit a button or because an agent made a phone call… Let’s at least force it to be disclosed and see how long that hidden practice lives on.
If an agent is willing to pay $3,750 to a site…why not directly to the client? And yet…many “love” referrals and “hate” clients asking them for a dime. I never understood that.
“Taking it one step further, then, are buyers who use traditional commission split agents more disadvantaged than 100% commission agents?”
In a nut shell, yes. But only if the business owner, agent, passes on some of that savings. Say an agent is making $7,500 per on average off $15,000. They can open up their own brokerage, give the client $5,000, and still make more than at the traditional brokerage ($10,000 vs. $7,500), so it could be a win-win for the agent and their clients.
Same as the scenario of approaching the listing agent direct. When there’s more money on the table, there’s more chance some of it will end up back with the consumer. But it’s not a guarantee…until it becomes a stated business model.
I’m not averse to referral fees that are actually a split between agents who share in the services to the client. But 25% just shooting off the table because someone hit a button or because an agent made a phone call… Let’s at least force it to be disclosed and see how long that hidden practice lives on.
If an agent is willing to pay $3,750 to a site…why not directly to the client? And yet…many “love” referrals and “hate” clients asking them for a dime. I never understood that.
Patent Guy,
I’m not sure the buyer thinks about the agent at all when they hit that button. Often they think the button is like an IM to the listing agent, who is going to come and open the door for them to see it. Most are surprised when it is not the listing agent who shows up at the door.
“Oh what a tangled web we weave…”
“Oh what a tangled web we weave…
Ardell,
Good point. I suppose it’s a tough world out there and (some) agents will try anything to get attached to a buyer to fetch a commission. Of course, the people hitting the “button” probably hit more than one, so now they will have multiple apsos yapping at the heels.
But now that you point this out, I’ve seen plenty of broker sites (at least on Hawaii) that strip the name of the listing agent/broker off the properties to try and get you to call them instead. If you did not know better, you would think it was their listing. I would use google and eventually find the actual listing broker.
I don’t go to open houses anymore, in great part because of the lurking agents that follow you around and pepper you with questions about “what are you looking for”, “are you working with someone” etc. Sometimes I could not concentrate on the house I was in because of the noise (like those little flies that goes straight for your ears in the summer time).
PG,
I have a post on hold where one of my non RE friends stopped in an Open House and there were SIX booths of Avon, selling handbags and kitchen equipment, etc…She said no one asked anyone how much they liked the condo…they all wanted to sell make up and accessories 🙂
I took a pic of her “goodie” bag full of free lipstick samples and brochures, but never got the post up. She said you couldn’t even step out on to the “deck perfect for entertaining” because the Avon Lady’s booth was blocking the door.
It’s a weird world out there. In the last recession I remember agents trying to sell other agents things they had inside their jackets and out of the trunk of their car. Anything to make a buck 🙂
This is simply an extension of Zillow’s model from day 1. Generate as much traffic as possible to the portal and sell advertising. Partnering with the Seattle PI just creates another door. This is the same basic strategy Zillow has used to get thousands of agents to drive traffic back to Zillow by framing their market stats API.
While its possible that Zillow gets into the referral business, its highly unlikely. Its actually more likely that Zillow will offer templated agent websites with basic CRM functionality and/or blogs with display advertising…in effect creating thousands of mini zillow sites. This is an extension of their profile page program and inline with their primary strategy. Agents drive traffic to their own sites (which are simply zillow microsites) and Zillow collects display advertising revenue (similar to Facebook)
Zillow is keenly aware that it is far more cost effective to work with the agent population and as a group they drive more traffic then Zillow could ever hope to do through traditional marketing efforts.
So to answer Jim’s question. Is Zillow the competition? Not any more than it has always been. Is concern about Zillow charging referral fees warranted? Not in the foreseeable future.
This is simply an extension of Zillow’s model from day 1. Generate as much traffic as possible to the portal and sell advertising. Partnering with the Seattle PI just creates another door. This is the same basic strategy Zillow has used to get thousands of agents to drive traffic back to Zillow by framing their market stats API.
While its possible that Zillow gets into the referral business, its highly unlikely. Its actually more likely that Zillow will offer templated agent websites with basic CRM functionality and/or blogs with display advertising…in effect creating thousands of mini zillow sites. This is an extension of their profile page program and inline with their primary strategy. Agents drive traffic to their own sites (which are simply zillow microsites) and Zillow collects display advertising revenue (similar to Facebook)
Zillow is keenly aware that it is far more cost effective to work with the agent population and as a group they drive more traffic then Zillow could ever hope to do through traditional marketing efforts.
So to answer Jim’s question. Is Zillow the competition? Not any more than it has always been. Is concern about Zillow charging referral fees warranted? Not in the foreseeable future.
Jim: CB actually framed interactive search on oregonian.com and king5.com for well over two years awhile back. Zillow taking over real estate search for the Seattle PI really isn’t any different.
Jim: Consumers do not grasp the concept or value of ‘full inventory’. Zillow knows this and understands partial inventory doesn’t effect their traffic. By not being a member of any MLS system, Zillow doesn’t have to dumb down functionality of their website to meet MLS rules. They can display whatever they want and don’t have to deal with all the hassles of multiple MLS integration rules.
David said this: “My feeling is that as more and more people realize they have made very poor choices in the purchase of Real Estate that people will look for more qualified people to help them and less of the gimmicks.”
I think this is true. I think the internet is a fabulous advertising method – lots of pictures, lots of data, but the truth is, it’s got a lot of garbage and clutter. I really get the daily emails from Trulia and Zillow to see what is going on, but I don’t open them, since the first paragraph tells me they are still following the People Magazine niche for real estate.
Face to face, competent advice. Far too many people bought real estate between 2004 – 2008 without competent advice.
Referral fees? I never did like the non-real estate referrals (like Costco etc), and won’t take them. Relocation companies haven’t been discussed — but I also feel that those fees, which often are 30 – 50% of the agent’s commission, mean the consumer client is NOT getting the best agents.
Sure – today many competent agents might be willing to work for 30 – 50% ‘off’ … but not in the long run, and certainly not for an ‘opportunity’ to work the high pressure relocation buyers. Relocation seller listings IMHO are actually pretty easy to work, but relo buyers? They need lots of time, lots of handholding, and very competent advice – not discounted advice.
One day soon, I hope that the relocating consumer examines their relocation package and asks some important questions.
David said this: “My feeling is that as more and more people realize they have made very poor choices in the purchase of Real Estate that people will look for more qualified people to help them and less of the gimmicks.”
I think this is true. I think the internet is a fabulous advertising method – lots of pictures, lots of data, but the truth is, it’s got a lot of garbage and clutter. I really get the daily emails from Trulia and Zillow to see what is going on, but I don’t open them, since the first paragraph tells me they are still following the People Magazine niche for real estate.
Face to face, competent advice. Far too many people bought real estate between 2004 – 2008 without competent advice.
Referral fees? I never did like the non-real estate referrals (like Costco etc), and won’t take them. Relocation companies haven’t been discussed — but I also feel that those fees, which often are 30 – 50% of the agent’s commission, mean the consumer client is NOT getting the best agents.
Sure – today many competent agents might be willing to work for 30 – 50% ‘off’ … but not in the long run, and certainly not for an ‘opportunity’ to work the high pressure relocation buyers. Relocation seller listings IMHO are actually pretty easy to work, but relo buyers? They need lots of time, lots of handholding, and very competent advice – not discounted advice.
One day soon, I hope that the relocating consumer examines their relocation package and asks some important questions.
Hi everyone,
Spencer from Zillow here. Apologies for the slow reply — I was off the grid for a week’s vacation.
Thanks for the post and the commentary. I do think the Zillow / Seattle PI announcement is another important milestone in Zillow’s history. We started the company less than 4 years ago, and already we’re among the top 3 real estate sites nationwide with 8.8 million unique visitors and traffic growth of around 70% year-over-year. More importantly to RCG readers, Zillow is now likely the largest real estate site in Seattle or Washington state (although it’s very hard to get reliable information on that) — in Aug09, Zillow had 518,958 visitors in Seattle, up 57% year-over year (source: Omniture Analytics, our internal data provider). The PI partnership helps grow our reach in the Seattle area by putting Zillow in front of their many online readers. For the PI, the partnership is beneficial because they now have a top-notch real estate search experience, one which they could never create on their own.
Regarding the comments about Zillow not having NWMLS membership, let me clarify — yes, it’s true that Zillow no longer is a member of NWMLS nor do we have an NWMLS feed. We used to be members of NWMLS but dropped out a few months ago. We never used the NWMLS feed for anything though — NWMLS listings were never on Zillow. The reason we joined NWMLS in the first place was because we viewed it as sort of a Chamber of Commerce for our industry — something that a good corporate citizen should be a part of. Perhaps we were naive in that decision, made 4 years ago back when we were real estate rookies. It turned out that our membership in the NWMLS caused a lot of suspicion on the part of brokers and agents, and stoked fears that Zillow had some master plan to be a discount brokerage (a la Redfin). So the NWMLS membership was causing us much more harm than good, and we dropped out.
We do currently receive listings from about 200 MLSs nationwide (though we’re not Members of any of them), but NWMLS is not one of those which sends us (or ever sent us) listings.
Despite not having NWMLS listings, we still have most of the listings in the area thanks to listings feeds from most major brokerages (e.g., CBBain, RE/MAX NW, Pru, etc). You can see how many listings we have in a given area by just doing a search on the site.
Thanks everyone for your interest in Zillow, and if I can ever be of assistance, please don’t hesitate to email me (spencer at zillow dot com).