US property portal Zillow has announced it will start buying and selling houses for the first time later this month, in an industry game-changing move that could see the portal become a direct competitor to real estate agents.
The move marks a huge change in the portal’s business model, with Zillow’s CEO Spencer Rascoff stating on multiple occasions in the past: “We sell ads, not houses”.
It comes amid rising competition from companies like Opendoor, OfferPad and Redfin, who give instant offers for sellers who need their houses sold fast.
It follows the launch of Zillow’s Instant Offers programme last year, which connects homeowners to offers from investors, as well as a comparative market analysis from a local real estate agent.
Starting in the Phoenix and Las Vegas markets, Zillow will partner with local brokerages and agents to buy and sell homes.
Homeowners in Phoenix and Las Vegas will be able receive an offer directly from Zillow, which will get the home ready to list on the open market and sell it with a local brokerage. The homes will be listed in the local multiple listing service (MLS) and on Zillow.
Zillow said the new business is a way to provide more options to sellers.
“Even in today’s hot market, many sellers are stressed and searching for a more seamless way to sell their homes,” said Jeremy Wacksman, Zillow’s chief marketing officer. “They want help, and while most prefer to sell their home on the open market with an agent, some value convenience and time over price.”
Companies like Opendoor and OfferPad — which partnered with Zillow for Instant Offers last year — offer a similar service. Fellow Seattle real estate giant Redfin has RedfinNow, which launched last year and lets the online real estate brokerage buy homes directly from customers.
Back in 2015, Rascoff said the portal views itself as a media company, not a real estate company.
“We sell ads, not houses,” he stated. “We’re all about providing consumers with access to information and then connecting them with local professionals. And we do a great job of giving those local professional high-quality lead, they’ll covert those leads to at a high rate and then want more media impressions from us. So we’re not actually in the transaction, we’re in the media business.”
That’s certainly not the case anymore.
Zillow said that when it buys a home it will make the “necessary repairs and updates” and list the home “as quickly as possible”.
What make Zillow’s direct buying programme different from companies like Opendoor and OfferPad is that it does not cut real estate agents out of the process. A local agent will represent Zillow in the purchase and sale of each home, which will enable agents to earn commission.
Zillow plans on partnering with three brokerages in Phoenix and Las Vegas: West USA (Phoenix), Berkshire Hathaway HomeServices Arizona & Nevada Properties (Phoenix and Las Vegas), and Coldwell Banker Premier Realty (Las Vegas).
The announcement failed to win over investors, with shares in Zillow falling 9.3% to $48.77 as of mid-day on Friday, knocking more than $900 million off its stock market value.
DealMakerz wonders if UK portals Zoopla and Rightmove will follow suit. One of the biggest issues is how portals can prevent conflicts of interest if they are selling ads as well as buying and selling homes.
Zoopla and Rightmove will no doubt wait to see how Zillow’s new proposition pans out before taking the plunge.