Thank you, Zillow, Realtors will now have to Step Up!

Zillow, the real estate tech company, keeps getting bigger.  They started different branches of the company that includes buying homes direct, acquiring a real estate appointment web-based company Showing Time, and now working towards becoming their own real estate brokerage firm.  In hindsight, none of us can really be surprised.  This is what companies do.  They grow, expand, and provide more for their consumers to increase their shareholder wealth.

By becoming a licensed brokerage, they will be able to represent their own buyers and sellers instead of having to outsource to agents in the area.  This is a similar model to what Redfin has been doing.  Nationwide, Redfin has a market share of .93% nationwide.  My hunch is Zillow will become another discount brokerage like Redfin.  However, typically, this model doesn’t work for the masses.  Check out my article, Opinion: Why the Discount Model does not Work to see why.  However, because Zillow is as big as it is, anything is possible.

So, what does this mean for Realtors/Real Estate Agents?  When looking at history, Realtors have had a hard time adapting to change and made strong efforts to avoid it.  Because of Zillow, many are upset, scared, and mad.  Especially because Realtors effectively funded this endeavor through advertising on their website.  It is kind of like the workers of an assembly line building machines to take over their job on the assembly line.

As a Realtor, it made me think long and hard about the industry, what’s in store, and frankly, how to pivot.  It is important to realize the old ways aren’t going to work anymore, and it is about time that this profession started getting disrupted.

From the way I see it, there are four avenues for agents to go.  I am going to use “you” in place of Realtor/Real Estate Agent because right now, YOU are my audience.

1. Quit: Don’t bother trying to compete because the reality is, you are going to have to work 2x-5x as hard as before.  If you aren’t cut out for it, then retire.  This isn’t a bad option if you have had a long-standing career and towards the end of your work cycle anyways.  But for those younger folks, this could be your “come to Jesus moment.”
2. Join Zillow: Heck, you are already licensed and have some experience, so maybe Zillow is hiring.  Chances are you will make less than if you were on your own, but if you can’t beat ‘em, join ‘em.
3. Become a discount broker: Compete on price.  It is an option, however because your dollar per transaction will effectively go down, you will need to either (1) provide way less services to your clients or (2) make it up on volume.  This is most likely an uphill battle because of the intake of volume may not be enough dollar wise to hire an assistant or other administrative task.  This is especially true when working with buyers.  In this market, you could be working 6 months with one buyer before you get paid, and at a discounted rate at that.  It is not survivable.  The only possible way this model might work is at higher price points (in this case for example, over $1,000,000).  But often as you go up in price, expectations are higher from the Sellers to the listing agents, which means more money out of your pocket.
4. Do your job and show unique value:  This is where the money is.  Differentiate yourself from the pack to show your worth.  I bet you none of those Zillow agents have house hacked a home, so how can they help their clients become investors?  I have.  Twice here in Los Angeles.  As a matter of fact, I am a case study in The House Hacking Strategy, published by Bigger Pockets, the premier real estate investment organization.   Can you prove that you have netted more money to a Seller over a discount brokerage, even with the higher commissions?  I have.  I took over a dead listing from a discount broker, listed it for $25,000 higher, and got multiple offers in the first week. 

I’m excited for this.  There are 1.4 million Realtors in the United States.  Some exceptionally good, some exceptionally bad, and many in between.  Even with inventory low, there is enough business to go around.  You just have to hunt for it. 

And if you are a buyer or seller, don’t get sucked into the next shiny object that is also the cheapest option.  This profession takes a certain skillset that if done right, can make you wealthier in the long run.  Would you want the cheapest attorney representing you, or are you willing to spend a little more to get that much better representation?  I’m not going to go to a dentist who is the cheapest because they cut corners to save money.  Keep in mind real estate is one of the most important investments of your life.  You should hire and act accordingly.

So once again, thank you Zillow.  Through your disruptions, you are helping Realtors step up their game to show the true value that they need to bring for their clients.