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Digital Transformation of the Real Estate Industry

Amazon will buy Zillow

I subscribed to Kerry Grinkmeyer, US Best Homes of Birmingham, AL after coming across his video Amazon will buy Zillow, 2nd video featured below.

Where's the Buy Button?

I predicted 5 years ago home buyers will be buying homes on Amazon.

What then will be the role of the real estate agent?

Zillow doesn't need agents in their ibuyer program. Depending on the size of the market share Zillow is able to wrestle from real estate brokers, the need for real estate agents will not be as great. Not that the need is great to begin with.

 

There has always been more agents in local markets than there is business to go around. In spite of agents' appearance of congeniality in the market place, the imbalance -- only 10% of all agents in business transact 90% of real estate sales which value translates to a dismal reality that 90% of total number of agents transact only 10% of all sales -- is what makes local, real estate brokers and agents competitive, which is a good thing for consumers.

On second thought, Zillow won't have to wrestle market share since real estate brokers and agents have been freely giving them their listings on a silver platter since shortly after Zillow's founding in 2006.

Department of Justice sues National Association of Realtors® (NAR)

NAR lost. The too-long-didn't-read version is basically the Multiple Listing Service was made to syndicate brokers' listings with competing brokers' virtual online websites. This opened the door for listing syndication to online sites, such as Zillow and Trulia by sharing the crown jewel of brokerages: their listings. Ever since the final judgment in 2008, Zillow has been laughing all the way to the bank. Although the NAR and the MLS had to cooperate to create a level playing field for the sake of consumers, nothing in the final judgment said brokers and agents had to pay Zillow money to advertise on Zillow only to be sold back their own work product.

There was a window of time, however, post-2008 when brokers/agents could choose to withhold syndicating their listings on all other websites, whether competing brokers or sites such as Zillow. However, more brokerages than not adopted the general policy and procedure that it was a good thing to syndicate the broker's listings. In my opinion, the role of the local, real estate expert is doomed to the dust bin of real estate history, because their listings are up for grabs. Instead of resisting, real estate brokers have allowed the top 10% -- the only ones who can afford to advertise on Zillow -- to sell out the bottom 90%.

It used to be when I listed a home for sale on the MLS and it was syndicated on Zillow, I would be the one to receive inquiries from the contact form on Zillow. Not so anymore. Those interested inquiries go to the local agents who pay Zillow for advertising. It is not unheard of agents paying thousands of dollars each month to get those hot leads from the work product of other agents. In my opinion, this practice is unfair and has created a pay-to-play real estate model of business that, frankly, I find revolting.

What will be the role of the real estate agent?

The hopeful in the real estate business are predicting agents will become more along the line as consultants and trusted advisers. Like one agent discovered suing his state's department of real estate to be allowed to offer a la carte real estate services brought the DOJ and FTC to rally on his side. In the end, though, he went back to the traditional, full-service model of conducting his real estate business because he thought it best for his clients.

The 1% commission listing Redfin model is a rinse and repeat of HelpUSell founded in 1976 -- and doesn't seem to be gaining much traction or popularity. Discounted services amount to you get what you pay for. If Walmart prices are all one can afford, then Walmart will have to do. However, the difference in real estate is commissions are not paid upfront but out of net proceeds. The difference in price does not matter when a home owner has a genuine need to sell. In other words, they will pay a higher commission if it means their home will sell at a fair price and in a timely manner with less trouble. I've noticed in my 12+ year real estate career, those home sellers who attempt to list for sale by owner are either (1) testing the market, (2) have an ulterior motive to pretend they are selling, or (3) in denial they really can't do it themselves. Those who use a 1% commission model to try to save some money usually do not have experience selling homes. It is only after the experience turns sour and results in one-star reviews that they then realize the adage one gets what one pays for. Is Redfin successful?

Entrance: iBuyer

iBuyer is the game changer. Zillow will buy homes outright from home sellers, give them extra time, if they need it, to find another home, pack up and move.

  • No open houses or showings to deal with. 
  • No inattentive agents who leave back doors unlocked, or trip security alarms, to put up with. 
  • No snarky buyer or buyer agents' comments to have to hear. 
  • No petty arguments about keys and garage door remotes to engage in. 
  • No question about buyer's ability to pay, or quality of loan approval, or if they'll lose their job or do something dumb like buy new furniture on credit before close of escrow to worry about.
  • No contingencies to prolong the process.
  • No waiting and praying buyer will perform.
  • Close escrow in as little as 2 days.
I mean, what is there not to like? Only one thing comes to mind and that would be price.
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