Zillow's 'Instant Offers' Controversy Distracts Us

By
Real Estate Broker/Owner with Edge Real Estate Agency CA BRE #01880469

Oh, the slings and arrows Zillow invites upon itself!

The "Instant Offers" controversy led my local board of realtors in Southern California (South Bay) to host a meeting last week to vent the issues.

Judging from the tone in the room, agents smell a rat. People suspect they've seen Zillow showing some kind of "true colors" or the first hints of a secret plan with this new test. Suspicions that Zillow plans to "disintermediate" realtors out of the business are only fed when Zillow moves sooooooooooo close to facilitating a transaction directly.

What's more, the tests in Las Vegas and Orlando have Zillow collecting a "service fee" of 8-9% on transactions put together through "Instant Offers," which sounds a hell of a lot like Zillow taking a commission for making a match.(Ya think?)

Reasonable question that seemed to be on everyone's minds: How much longer will Zillow keep agents involved?

At the end, though, I suspect that on our side, as realtors, it's much ado about a nonexistent threat. In fact, we may be missing bigger threats emerging at the same time as "Instant Offers."

The meeting my board convened last week featured a Zillow representative, Wes Wiggins, and the VP and General Counsel of our vast regional MLS (CRMLS), Ed Zorn. You had to admire the two for stepping straight into the firing line.

The moderator encouraged the overflow crowd to keep their pitchforks on the ground for the first hour, while a series of written questions were presented to the panelists to flesh out the positions of Zillow and the MLS.

That discussion was full of reassurances from Zillow that real estate agents are their primary customers, and that they would never switch business models to become an MLS or a brokerage. (One question was, "Is Zillow trying to become Redfin?" To which Mr. Wiggins' answer was: "No way. No how. No chance.")

Mr. Zorn, from our MLS, added that CRMLS's contract with Zillow specifically prohibits Zillow from creating an MLS or becoming a brokeage. Under that contract, much of our regional MLS database pours into Zillow, but Zorn said it could be "switched off in 30 seconds" if CRMLS saw actual brokerage activity by Zillow.

Right now, more than 95% of listings entered into our MLS go to Zillow by direct choice of member brokerages, who must "opt in" to sending their listings to the portal. Losing that feed could be devastating to Zillow, at least in our region.

Moreover, Zorn said, the most alarming aspect of the "Instant Offers" test, that 8-9% "service fee," likely could not be collected in a California version of the system – if it ever rolls out here.

Zorn explained that anyone who collects transaction-dependent fees in California must hold a real estate broker's license. Hence the test model for “Instant Offers” likely could not be implemented here, on pain of Zillow becoming a broker and instantly losing access to almost 50,000 active real estate listings through CRMLS.

By Zorn's telling, Zillow is hemmed in.

I think it's fair to say that our MLS's top brass views Zillow more as a member benefit than a threat. If the MLS feed goes out to all agents & brokers and 16,000+ IDX websites (like my own Manhattan Beach Confidential), it still doesn't approximate the consumer reach provided by Zillow. So by getting our listings in front of more eyeballs, the MLS thinks they're doing their job better, not feeding a monster.

Mr. Zorn sounded a lot like Zillow's rep when he said something like "Instant Offers" could be "a good way to get listing agents in front of sellers." Indeed, we're told that most of the sellers dipping their toes into the "Instant Offer" process are, instead, choosing to list with Zillow agents to whom they've been introduced.

Full disclosure: I pay Zillow and have received good leads and successful business through my relationship with them. I tend to see Zillow as they portray themselves: as an advertising platform (really a pricey lead-gen system). I can't quite see why they'd want to cut off the predictable flow of advertising dollars in favor of a speculative flow of real estate commissions.

So while I see how and why my colleagues fear a systemic threat from Zillow, I tend to view the "Instant Offers" program as just another lead-gen scheme Zillow is tweaking. I'll probably never even have a use for it in my coastal markets.

If "Instant Offers" turns out to be just a gimmick, one that literally cannot presage a Zillow move into actual real estate brokerage, we may wonder in a few months or years what all the fuss was about.

Curiously, we haven't had a meeting at our association about Redfin, their upcoming IPO or what an actual brokerage like that, whose app is already on the phones of nearly all our clients, might do to disrupt our market. That could be a robust discussion.

Asked about his "5-year vision" for both Redfin and Zillow, Mr. Wiggins opined that five years from now, Zillow still won't be a brokerage, but that Redfin would be trying more and more to be like Zillow.

So, which one are we focused on?

Comments (33)

Chris Lima
Atlantic Shores Realty Expertise - Port St Lucie, FL
Local or Global-Allow me to open doors for you.

Great post, Dave.  I often wonder...."Why do we keep feeding the beast?"

Jul 18, 2017 06:12 AM
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Full disclosure I give no money to syndicators and that includes realtor.com also. I agree that a huge amount of time and energy are wasted or worry about Zillow and not on our individual business model and it's value propositon. If agents are worried about Zillow it would be because of the war to have the most comprehensive real estate database, and for that include bigger threats like Google and Amazon. We have RPR which is the king of real estate data at the present, but please everyone, foucus and fighting battles for the future rather than the past.

Jul 18, 2017 06:30 AM
Hannah Williams

Joe Pryor They are not the past  . I see agents currently buying leads and wasting their money . Also at the closing table agents pushing clients to give them a recommendation on Z .  How unprofessional . It is the here and NOW

Jul 19, 2017 08:02 AM
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

I simply don't trust them or anything they say. 

Jul 18, 2017 06:30 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

They are focused on doing what they can to make money for their stockholders.

Jul 18, 2017 07:10 AM
Dave Fratello

You're right of course, Jeff. They have to explore every niche. I wonder if we can trust them when they say it would require tossing their business model overboard to go into the brokerage business. That would be bad for their stockholders... probably

Jul 18, 2017 10:19 AM
Luke Acree
ReminderMedia - King of Prussia, PA
Making Agents Memorable

Informative and well written. Agents need to focus on leveraging new tech, even if it might be a wolf in sheep's clothing. Any agent that embraces change has a much better chance of profiting from it.

Jul 18, 2017 07:10 AM
Dave Fratello

Thank you, Luke. I note that in any given market, there may be 5-10 agents advertising on Zillow. Hundreds more don't, for any number of reasons.

Jul 18, 2017 10:20 AM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

Interesting. My prediction is Zillow will get swallowed by Amazon. That will be interesting!

Jul 18, 2017 09:46 AM
Dave Fratello

Oh my that would be huge. Did you see on Inman that they think they've sniffed out a plan for Amazon to go into agent referrals? First step?

Jul 18, 2017 10:21 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Kill the Monster while it's young ! Don't let it grow up and throw it's weight around ! Whoops , we're too late , aren't we ??????

Jul 18, 2017 10:21 AM
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

Dave Fratello ~ I'm surprised to hear that you find any success with the impression/lead proposition, especially in So Cal. I talk to a lot of agents that have recently signed up with Z and they can't be more upset and feel that the leads are a complete waste of time (and or) not even legit. In fact, I just had lunch with one of the biggest producing agents in LB. She thought that she would see what Z could do for her and bought impressions/leads. Needless to say, she's one of the biggest producers in my area (so it is safe to say she knows the business well and she know how to generate, earn, and keep business) but she was so upset that she fell for it. She told me that she now only pays Z just a fraction of what she use to pay Z and that's only because she doesn't want any paying agents to show up on her listings. 

Anyway, I'm sure there are many agents and brokers that are on the other side of the fence when it comes to Z and would like to see them leave just as fast as they entered. And that just proves we are a divided industry. But forget about us for a moment and let's see what consumers think and feel. 

Based on 131 ratings and 269 latest reviews from Consumer Affairs, Zillow get's a dismal 1 1/2 star rating. Now I'm pretty sure that if you (and or) any other agent or broker "or" for that fact most businesses received that kind of feedback from actual consumers? Well, let's just say it would be hard to do future business... At least I hope we can both agree on that?

The way I see it, not only do we deserve better, the voice of consumers need to be validated and considered, too 

Jul 18, 2017 11:01 AM
Jon Kolsky

Yes.... We were neighbors

Jul 18, 2017 03:55 PM
Dave Fratello

Hey Jon, thanks for the remarks. I think top producers are often ill suited to online leads. Sure, plenty of the leads are no good. More often they are simply long-term. But Zillow wouldn't function if every single agent paying in was failing over and over. I'll go look at the "Consumer Affairs" review but I am not sure *who* is reviewing *what* there...


BTW, Jon, did you live on Lama @ one point? :)

Jul 18, 2017 02:03 PM
Lyn Sims

Thanks for that link Jon Kolsky . Great for a chuckle or 2.

Jul 20, 2017 11:40 AM
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Zillow, Amazon and all the current and all the future industry disruption companies want a piece of the nationwide Realtor commission pie. They are working assiduously to convince the public that Realtors are not needed. End-consumers are buying that position, which is causing multitudes of transactions to blow up midstream or last minute when they find out that selling a house is more complicated than buying a pair of shoes online.

Jul 18, 2017 12:58 PM
Sam Shueh

Some traditional sales are completed with online auction. You think you submitted the best offer and found out someone beat you to it from internet. 

Jul 18, 2017 03:07 PM
Paul McFadden
Responsive Pest Control - Seattle, WA
Pest Control, Seattle, WA.

I think so. I just blogged my prediction

Jul 18, 2017 01:55 PM
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

The internet sites ecommerce will change the way realtor handles the traditional sales. It will not going to remove all realtors out of the scene. It will make many bleed.

 

Jul 18, 2017 03:04 PM
Jerry Murphy, CRS, SRES
Long Realty West Valley - Anthem, AZ
Anthem, Phoenix, and Scottsdale AZ Real Estate

Ever since I entered this industry there's always been a lack of confidence issue with agents. Every new shiny object seems to threaten them and their livelihood and ends up to be much ado about nothing. Older agents FREAKED OUT when the internet came along and listings were able to be posted online.  Oh no! they cried this will be the end of the real estate industry.  Then the same cry when the discount brokerages came along.  Then the same cry when Zilow and Realtor.com and Trulia came along and lately Open Door and Offer Pad.  And yet here we are.  If we prove our value to the general public there will ALWAYS be a need for Realtors.  Stay calm folks.

Jul 18, 2017 03:21 PM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Jokingly, I was told - there are two oldest professions that will never go away, Dave Fratello.

One of them is Real Estate.

Jul 18, 2017 09:56 PM
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

Real Estate Industry must expose Zillow likes to the consumers!!!

More than 95% of listings entered into our MLS go to Zillow by direct choice of member brokerages, who must "opt in" to sending their listings to the portal. Losing that feed could be devastating to Zillow

Jul 19, 2017 04:47 AM
Lyn Sims

We almost had them in that very spot not too long ago & they outsmarted us again. They went directly to the MLS's themselves & bypassed the boards for the direct feed.

Jul 20, 2017 11:37 AM
John Wiley
Fort Myers, FL
Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA

The Zillow debate has been going on for some time. My observation is that agents who pay Zillow money for leads are more likely to downplay the adverse affects. I hear many say, "don't worry about them, just do your business well".

The larger a company becomes the more affect they have. We should have stood up as a group a long time ago and we would not be dealing with more encroachment to our business.

Jul 19, 2017 06:09 AM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

John Wiley  It is never to late to take a stand as a group we must stop buying zip codes ..This is our business

 

Jul 19, 2017 08:12 AM
Ginger Harper
Coldwell Banker Sea Coast Advantage~ Ginger Harper Real Estate Team - Southport, NC
Your Southport~Oak Island Agent~Brunswick County!

This is information that we all needed to be aware of.  I will share for others to see also. Thanks.

 

Jul 19, 2017 11:43 AM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thank you for the post. I will read it again. Have a good day.

Jul 19, 2017 12:31 PM
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

Someone's been sipping the Z kool-aid at your board. 

Z is hemmed in = no way, you just keep telling yourself that until their legal team starts spinning your head around like Linda Blair.

You did a great post, fair & balanced. I just don't know anyone that can be balanced when you mention even the consonant.

Jul 20, 2017 11:35 AM
Stavrula "Sam" Crafa, RNC,GRI, CDPE, PSA
Future Home Realty - Seminole, FL
Providing the integrity and service you deserve.

I'm not all that worried about Zillow. I had an established buyer call me about a listing she saw on Zillow, that didn't show up in the auto search I had set up for her. She was quite shocked to hear that not only was the house currently NOT active, the last time is was on the market was in 2008!!!  Not telling you anything you have not experienced before. If Zillow's "Instant Offers" or any other system they try to put in place follows their obviously inaccurate listing information, we have nothing to worry about. 

Jul 31, 2017 05:40 PM