Zillow is a new start-up, based in Seattle, which recently raised $32 million in venture capital. It’s headed by Richard Barton, founder of Expedia.
Expedia didn’t kill the travel agency per se, but it was definitely one of the nails in the coffin. Since 1995, many travel agents have exited the industry. Of the ones still in business, some have abandoned the “brick and mortar” agency for a home-based business to reduce overhead, and those who remain have managed to survive by promoting other travel products like cruise lines and train excursions, or by promoting their ability to aggressively research and assemble complex travel packages on a moment’s notice (essentially acting as a very advanced concierge).
Many people are expecting Zillow to shake up the real estate business in a similar fashion.
According to this article in The Wall Street Journal, Mr. Barton said major change in home selling is inevitable over the next five years or so because there is an unsustainable disconnect between the commissions charged by most agents and the value of their services.
So, I can just see these guys sitting around a table talking
“We went to Harvard Business School and are only making $XX a year and these real estate agents just went to some public university or even worse, a community college, and are making just as much as we are! Let’s use our superior intellect and design a better website and skim their customers off the top and then sell their clients back to them, for a price! That will show them to mess with business school grads!
They are perfect Capitalists, not making the wealth themselves, but figuring out a way to skim profits off of other people’s labor.
Are they going to schlep around from house to house in the evening and on Saturdays and Sundays, in the rain, perhaps with the Buyers kids in tow, week after week, month after month, searching for a dream home? No. But real estate agents do it, and those business school grads and real estate repackagers and website designers and computer programers want a cut of the agents labor.
It’s interesting that the majority of real estate agents are female, as they seem to excell at this “people-person” type of job. The skimmers at Zillow and Redfin are all males, at least the ones listed on their mastheads. A lot of real estate agents are women who have entered the workforce after their children are grown. They are people-people, not strategists, not computer programers, not business school grads. They are attracted to the business for a variety of reasons but if you ask them, a lot will say they like to help people.
What stupid women! Silly housewives! They should have been busy learning html and computer programing and search engine optimization and java script and stuff like that, instead of driving people around to look for their dream home!
Homegain is owned by Classified Ventures, LLC which is a strategic joint-venture 100% owned and funded by six large media partners. They are Belo Corporation, Gannett Company, Knight Ridder, Inc., The McClatchy Company, Tribune Company and The Washington Post Company. These are also mostly ran by men. Middle-aged white men. Homegain is also a “skimmer”. They have a partnership with Zip Realty to appropriate the MLS’s listings, lure the buyer in, and then sell that lead back to agents again. For a percentage, of course.
HouseValues.com and its sister site JustListed.com, has 18 managers listed on its Executive Team. They are quite progressive as it appears that 2 of these are women. Congratulations! (The CEO is, of course, a male Harvard Business School grad)
If you don’t make it worth an agents while to be available 24 hours a day to go run out and preview the latest listing or to write up a sales contract or hold a first-time buyers hand through the whole sales process, the good ones will leave the business and you’ll be left with idiots not up to the task.
One can’t buy a house over the internet like one can buy a book or a new IPod or a pair of slacks. Someone has to get the Buyer into the house, probably into lots of houses, over the course of many weeks or many months. They have to be tour guides, counselors, financial advisors, entertainers, sometimes babysitters, negotiator, and friend to many people. To say that has no value is wrong.
The subtext of what these real estate repackagers are saying is that the average real estate agent (most likely a woman who has entered the business after her children are grown) makes more money than she deserves, and they want a cut of the pie. And they know how to get it, by building superior websites to lure the new, young buyers who are entering the real estate market and who are used to researching and ordering everything online.
There’s lots of buzz out there surrounding Zillow. For some of the best dialogue, check out these websites:
Business Week Online How Scared Should Brokers Be?
Ravenna Houses “Zillow’s Infrastructure
Zillow Stories on Rain City Real Estate Guide
John Cook’s Venture Blog Zillow’s New Riches