You have heard about Zillow, right? If not you have been living under a rock. Well if you don’t know Zillow is the $8 billion dollar elephant in the room and the elephant is getting hungrier.
Those that are in the real estate business know that most consumers use Zillow to look for houses just like people use google to search for information. Zillow has found a niche for the new generation, instant home information. For the millennial's this is what they expect when they get on the web to search for homes. However this is not enough for Zillow, they are now making moves that has the country taking notice and as real estate agents you should be aware of.
First thing to realize is that Zillow like most massive business burn more money than they make. Zillow has been losing money for years however they continue to grow revenues. This growth in revenue is what dazzles investors and in 2017 they grew revenues to $1.33 billion which represented a growth of 24%. That is huge revenues and a respectable percentage growth but after the dust settles they lost $97 million. Although this loss was an improvement compared to the previous year. So they getting better in managing their business and are beginning to reach profitability, their stock keeps going up and in my opinion going in the right direction, that is until now. (https://finance.yahoo.com/news/why-zillow-group-jumped-19-223500315.html)
Growing and getting to profitability is not good enough, they have implemented a new strategy; Zillow 2.0. Their first move was releasing their CEO. They then brought back co-founder Rich Barton and he is making changes that goes against the past management strategy of partnering with real estate agents and lenders.
They purchased Mortgage Lenders of America and have launched Zillow Offers in April of 2018. Zillow Offers is basically Zillow’s version of buy and flip. They are in 14 markets and have bought 686 homes and growing. They have sold 177 of those homes and ended with a 0.5% from profit margin. Not great in my opinion. Yet the new management is boasting that they are going to purchase 5000 homes and achieve $20 billion in revenue. Therefore they are not leaving anytime soon. (https://www.forbes.com/sites/samanthasharf/2019/02/21/zillow-ceo-spencer-rascoff-out-amid-pivot-to-buying-and-selling-homes/#60fbe2d53c8a)
Think about this, they are buying houses directly from seller and selling to them to customer directly. This is direct completion from the company that once said that they are partnering with agents and lenders. They expect backlash for this change in strategy from the realtor community so they have instituted their naive agent strategy. Basically, they are letting us eat their scraps. The plan is, if the seller or buyer does not go with their offer, they will distribute the lead to the premier agent in the area. Let’s see this for what it is. They are competing with us and if they don’t capitalize on the opportunity; then, they are letting us take a crack at it for a steep price. So now we are paying full price for scraps off the table.
OK, so what are we to do.
Well first we have to understand that Zillow is not the only way to get leads, sell or buy a home. Before Zillow, there were millions of transactions that took place. We just have to go back to our roots but with a little tech know-how. One giant lesson to learn from Zillow is that they have proven to the world that there is a need to provide self-serve research and resources when looking for a home. Additionally, they have showed us the power of marketing to the tune of $8 Billion in revenues.
So how do we use this knowledge?
I believe the answer is simple. We must provide our customers the tools for them to search for the homes of their dreams and we need to do the marketing of ourselves and the properties. Of course, I am over simplifying the solution but I believe this is one of the building blocks that we all must possess. The other building block is the human factor. Keep in mind that buying and selling a home is an emotional transaction that needs the human touch. We must not forget how we felt during our first home purchase and sale. Use this knowledge and work with your buyer or sellers and learn about their needs on a personal level. This is what they are looking for.
Another thing to keep in mind is that we are supposed to be experts in the field of real estate. Keep up with your learning and be professional. There are no part time experts. Either you are or you’re not.
Of course there are many more steps in being a complete agent. It takes a lot of hard work but if you have the systems in place and do the work you can carve out success. I am not saying that you should abandon Zillow but keep in mind who you are working with and don’t make them your only method of reaching success.
I would love to hear you opinions on the Zillow trend and what you are doing to insulate yourself.
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