Zillow will begin buying and selling homes using agents

Zillow will begin buying and selling homes using agents
The real estate tech giant is expanding Instant Offers to Phoenix and getting into the iBuyer business, going head-to-head with Opendoor and its own partner OfferPad
BYJOTHAM ​SEDERSTROM Staff Writer TODAY 1:08 P.M.
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Zillow executive Errol Samuelson announced a major new business initiative for the real estate tech giant in an exclusive video interview with Inman on Thursday: Zillow will finally expand its Zillow Instant Offers program to Phoenix and begin buying and selling homes with its own money there and in Las Vegas, putting it in direct competition with iBuyers like Opendoor and OfferPad — the latter of whom Zillow also partners with on Instant Offers.

Zillow Instant Offers, which launched last year in Orlando and Las Vegas initially, lets prospective homesellers visit the Zillow website to receive an offer on their home from iBuyer investors, including companies such as OfferPad, as well as a professional home valuation and comparative market analysis (CMA) from a licensed real estate agent. The home seller can then choose to take the instant offer from the investor and receive all cash for their home, likely at a reduced rate, or list their home on the open market with an agent and potentially get a higher sale price.

Zillow interview with Inman from Mo Moghari on Vimeo.

Zillow’s new enterprise — offering to buy homes outright and resell them, using handpicked local real estate agents who are already participating in Zillow’s separate Premier Agent program to represent Zillow in both its purchase of homes and its re-sale of them — will launch within weeks, according to Samuelson, Zillow’s Chief Industry Development Officer.

“Just like before, when a potential home seller says I’d like to get an investment offer for my home, we will provide an offer and alongside that we will again provide a [comparative market analysis] from one of our Premier Agents,” Samuelson told Inman. “Now, in the event that the home seller decides they wish to go for the instant offer, we’ll be working with a local agent at a local brokerage in the market to represent us as the buyer of the home and we will also recommend that the seller work with the local agent,” Samuelson added. “In fact, we’ll introduce the seller to one of our Premier Agent customers.”

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Samuelson declined to say how many home sellers in Orlando and Las Vegas had visited Zillow Instant Offers to request one in the 10 months since the program originally launched, but did provide some ratios that are likely to reassure real estate agents: one third of the sellers who requested an Instant Offer went ahead and sold their home, but 90 percent of them chose to list with a human agent rather than taking an instant cash offer from an institutional investor.

Samuelson said these stats highlighted how Instant Offers is a powerful lead-generation tool for agents.

Zillow will partner with West USA in Phoenix and Coldwell Banker Premier Realty in Las Vegas as they roll out the new iBuyer program over the next several weeks. Berkshire Hathaway HomeServices Arizona & Nevada will team with Zillow in both markets, Samuelson said. Zillow spokespeople said that homes re-sold by Zillow itself would be clearly labeled. A Zillow spokesperson also provided the following graphic used to illustrate how Instant Offers and its new program will work:

Graphic outlining Zillow’s new Instant Offers expansion. Credit: Zillow

Zillow employees declined to elaborate on how much money the company will spend buying homes through its new iBuyer platform. Nor did Samuelson specify how much it would pay out in agent commissions for the homes it buys and re-sells. Samuelson said that while Premier Agents would not be charged to participate in the new Instant Offers expansion, home sellers would be charged a fee, though he resisted quoting any numbers.

“The fee, we’re experimenting, so this is early days,” Samuelson said. “We have an idea of what those fees are going to look like, but those could change as we continue to explore and experiment.”

In his interview with Inman, Samuelson repeatedly emphasized that what separated Zillow from other competing iBuyers was its focus on keeping agents at the center of the transaction. However, both Opendoor and OfferPad also say they will work with seller’s agent. Zillow’s advantage may lie in its Premier Agent program, which last year generated $760 million in advertising.

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Opendoor, which has amassed $320 million in funding since launching four years ago, is in the process of raising an additional $200 million that would value the company at $2 billion, according to a reports in March. The additional funding, according to a report in The Wall Street Journal last month, would allow the rapidly growing iBuyer to purchase homes in the six metropolitan markets it currently serves — including in Phoenix and Las Vegas.

Armed with $260 million, OfferPad is also active in the Phoenix, Orlando, and Las Vegas metropolitan areas (as well as the metro areas of Dallas Fort-Worth, San Antonio, Atlanta, Charlotte, and Raleigh-Durham).

In a report by the investment banking firm Evercore released last year, analysts forecasted growing enthusiasm on Wall Street for iBuyers, who use new technology to make quick offers on homes and often close within days through reduced friction in the negotiating process.

“We believe that investors should familiarize themselves with this new business model, as these iBuyers are likely to garner increased attention over the next few years,” according to the report, issued in June. “If successful, these iBuyers could improve liquidity in the housing market by reducing friction costs, and drive increased housing turnover (existing home sales).”

Zillow recently has been riding on a wave of positive financial gains, tallying a $10.5 billion market cap in March for the first time since going public in 2011. Following a strong fourth quarter in which the operator of Trulia and StreetEasy posted a record $1 billion in annual revenues, some analysts indicated that in order to grow apace Zillow would need to innovate.

The entry into the housing markets in Phoenix and Las Vegas also coincides with the planned integration this month of the Premier Agent app with Zillow’s transaction management portal, dotloop. Analysts have said that the company could be banking on a lead conversion model that would potentially drive up ROI by accurately measuring agents’ conversion rates.

“In terms of proving out conversion rates — not just getting them, but proving out — it’s all about getting dotloop integrated into the Premier Agent app,” Ron Josey, an internet analyst with JMP Securities, told Inman last month. “Then they can actually say ‘Oh, okay, this is how many leads I got from Zillow and this is how many I actually closed in a month’ and that will help to prove out the value that Zillow is providing to agents.”

Email Jotham Sederstrom

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Nashville-area homes sales essentially flat in June

Nashville-area homes sales were essentially flat in June, according to new data from the Greater Nashville Realtors. Prices, however, are close to reaching a new milestone.

There were 3,887 homes sold last month, up 0.4 percent from June 2016.

In a news release, Greater Nashville Realtors President Scott Troxel called the flat sales “no surprise given the current disparity between supply and demand in the market.”

Single-family homes sold in June for a median price of $293,753, up from $260,148 a year ago. Condo units sold for a median price of $199,350, up from $186,495.

The median single-family sales price in Nashville in May of this year was $279,142. If the median sales price goes up by a similar amount during July, that would push it beyond the $300,000 mark. For comparison, Nashville’s median sales price hit $200,000 for the first time in June of 2013.

There were 3,914 properties under contract at the end of June, compared with 3,863 pending sales a year ago. The total inventory of available homes, condos and lots at the end of June stood at 8,842, compared to 9,865 a year ago.

The Nashville-area ended the second quarter with 11,155 closings, up 2.8 percent from a year ago, making it the strongest second-quarter on record for the market.

“The last time our market performed this well in the second quarter was 2006, with 11,046 closings,” Troxel said. “We’re a few units short of being ahead of midyear 2006, but with half a year left for sales, I suspect we’ll come close to the 2006 record of more than 40,000 annual closings.”

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Is your MLS doomed?

NEW YORK — First things first. The multiple listing service (MLS) itself is not doomed.

But yours might be.

That’s according to panelists at the Inman Connect New York conference Wednesday in a session titled “Are the MLSs Doomed?”

‘Don’t be too happy yet’

Some attendees erupted into applause when moderator Brian Boero of brand, marketing and design agency 1000watt declared his confidence in the survival of the MLS right off the bat.

But he quickly said, “Don’t be too happy yet.”

“The MLS provides order to a market that is variable, volatile and consists of thousands of independent contractors that all do business somewhat differently but all agree to certain rules and certain norms,” he said.

“But while I don’t think the MLS is doomed, I do think there are persistent and, in some instances, quite serious problems.”

Some brokers and agents feel the MLS space is too fragmented and feudal, Boero said. There are 750 or so MLSs across the country, some big, some small, mostly Realtor association-owned, some broker-owned, some with overlapping geographic boundaries.

Other brokers and agents consider the MLS monopolistic, slow, out of its scope and anticompetitive, Boero said.

“The MLS is not doomed, but virtually every MLS today is doomed,” panelist and real estate consultant Rob Hahn told attendees. Hahn is known as The Notorious R.O.B. on his prominent blog.

He believes there will be 11 or 12 regional MLSs in the future, sometime in the next three to 15 years.

“The current paradigm of association of Realtors-controlled MLS is doomed,” Hahn said.

“The governance sucks. All this political electoral stuff. It just doesn’t work.”

MLSs are “not fast enough, not nimble enough. There are too many. You’re too small. And you’re too poor,” he added.

“Every MLS is run, even if it’s a for-profit entity, like a non-profit.”

That means they focus on cutting costs and not delivering cutting-edge technology to agents and brokers, according to Hahn.

He’d like to see Realtor associations and MLSs get divorced, more MLS consolidations, and have those fewer MLSs charge more money to be able to provide better tools and services.

Panelist Denee Evans, CEO of the Council of Multiple Listing Services (CMLS), doubted that even if MLSs ran at a higher profit margin that they could spend anywhere close to the $200 million that real estate tech giant Zillow Group spends on research and development annually.

“I don’t know that an MLS could get to that point,” she said.

‘Brokers don’t want to worry about MLS issues’

When asked whether Chicagoland MLS Midwest Real Estate Data (MRED) would survive, Hahn said, “MRED is fine as long as they do [a] midwest super regional [MLS].”

Panelist and MRED President and CEO Rebecca Jensen agreed with Hahn that there should be about 12 MLSs.

“MLSs are not all built the same way. We definitely have a variance in the level of service,” she said.

“You might have an MLS that is heavy on technology spend, other MLSs’ brokers have said, ‘We don’t need you for that,’” and would prefer the MLS focus on data aggregation, she said.

While Jensen doesn’t see the industry forming a national MLS, she thinks regional MLSs make sense.

Boero asked, “As an MLS CEO of a large MLS, what is your criticism of your industry specifically?”

“What I hear from brokers is that they’re having to worry about MLS issues,” Jensen responded.

“They don’t want to worry about MLS issues, they want to worry about brokerage issues.”

Brokers want MLSs to protect their data and tell them where it’s going, but they don’t want to hear stories about the people running the MLS using it as a competitive weapon, she said.

Hahn added, “I think a big part of broker unhappiness is governance. Harold Crye [of regional brokerage Crye-Leike Realtors] is not going to spend his entire working life going to board meetings of rinky-dink MLSs.”

He said he hadn’t heard a single broker complain about large MLSs like the Houston Association of Realtors MLS (HAR), MRED, or what is now Bright MLS.

It’s those 150-member MLSs that the world does not need or want, according to Hahn.

So how do you get to a dozen MLSs?

“I think the issue is going to be to understand that associations are the problem,” Hahn said.

“The people who are volunteers and leaders of associations, they recognize it.”

They know most members are only there to access the MLS, he said.

“[Associations] have defended the American Dream for one hundred years. How about you let the MLS do the MLS?”

Jensen disagreed with Hahn on that point.

“I don’t think associations are definitely the problem. In some markets they are,” she said.

“We work hand and glove with our associations. It is through our associations that mergers can happen.”

Associations and MLSs would be better off separately, Hahn said.

Right now, most agents that want to do business must join a local Realtor association in order to access the MLS. That means there’s little distinction between agents and Realtors.

The Realtor problem

“At some point Realtors are going to get tired of being painted with a broad brush,” Hahn said.

“The no. 1 problem of the working Realtor today is the agent on the other side” who is likely a “card-carrying, dues-paying Realtor,” he added.

This isn’t him saying this, Hahn said — it’s the National Association of Realtors through its DANGER Report.

The no. 1 threat to the real estate industry is “masses of marginal agents destroy reputation,” according to the report.

But as valuable as the report is, it’s a report, not action, Boero pointed out.

“I’ve been coming to the Inman conference since 1997 and every year there’s a session like this where we wring our hands” and nothing changes, he said.

But Jensen responded, “That might have been true a couple of years ago but I heard a statistic that there were over 100 MLS consolidations last year. That’s a lot.”

Delivering excellence and efficiencies

CMLS’s Evans said she thought MLS consolidation overall was a good thing in that it can help MLSs “deliver excellence” and “efficiency of scale.”

But she stressed that MLSs should be talking with brokers and agents about what they need and delivering that.

“We all have the same goal,” she said.

Moreover, even if the number of MLSs were to go down to 12 super regionals, those MLSs will have service centers across the country, similar to the electrical grid, she said.

“There will be some consolidation of resources. Limiting the number of bureaucracies … would definitely be a good thing,” she said.

Boero polled the audience, asking how many think there should be 12 super regional MLSs. About a third of hands went up.

He asked how many think everything is fine the way it is. No one did.

Jensen said she expects there will be fewer MLSs five years from now because of consolidation.

“Even if that doesn’t happen, … MLSs can work together on shared services, shared standards, shared licensing agreements,” she said.

Boero summed up the panel in this way: “The MLS is not doomed. [But] many MLSs are doomed because consolidation is gaining steam.”

Email Andrea V. Brambila

 

Redfin to fund mortgages for buyer customers

Redfin to fund mortgages for buyer customers

High-tech brokerage’s latest bid to streamline the homebuying process