Grumbling about online portals is an international obsession with real estate agents. While Australians love to complain about the cost of advertising on Realestate.com.au and Domain, in the US the complaints are levelled at Zillow dominating not just advertising, but lead capture.
And in both countries, the anxiety amongst agents is that the portals will seek to replace agents all together. It’s an anxiety that has been exacerbated by Zillow recently when it introduced a new functionality onto their site called Zillow Offers.
Zillow Offers is a move by Zillow into the world of ibuying. IBuying is where companies make cash offers for homes that are valuation based, and are able to turn around the transaction in just a day or two. They clean the properties up and sell them later on, making a small profit.
iBuying is like trading a car
It’s a little like trading in your car. You know you’ll probably get a little less than if you tried to sell it privately yourself, but sometimes the hassle and the time just isn’t worth the bother. Why go through all the drama of cleaning the property up, and agonising for 45, 75 or 90 plus days trying to find a buyer, when you can just take the bulk of the money and go on your way.
Zillow have upped the ante in the US in this game by mapping the market and putting a Zillow Offer button on every property on their site. In doing so, they’ve made their site the perfect place for sellers to not just research what their own properties are worth, but to find out what they could get for it if they decided to sell tomorrow.
A tactic to increase leads for agents
But at the Inman Connect conference in New York, real estate portal researcher and commentator Mike DelPrete revealed that the logic behind Zillow Offers was not to undermine agents. Rather it is to increase leads.
“All the portals are looking to move closer to the transaction and doing more of the transaction,” DelPrete said.
“They are moving from being lead generation machines to lead qualification machines, and from search engines to service engines.”
Market is growing rapidly
The iBuying market is small in the US but it’s growing apace. The originator was Opendoor, which began in Phoenix but is now in 16 markets, buying over 10,000 properties last year mainly in the $200,000 to $250,000 market and selling over 7000 of them for around a 4 to 5% price appreciation.
It works because especially at lower price points and in quieter markets, ibuying replaces uncertainty with certainty around selling.
And Zillow, with just 1% of the ibuying market – even despite its massive reach through the portal – has expanded its ability to generate leads for agents by an estimated $1b.
So back to Australia. What does all this mean for agents using Realestate.com.au and Domain?
iBuying is just another consumer offer
DelPrete says that the start of the consumer journey is key for all portals going forward. They all need to be offering ways to differentiate through services that genuinely help buyers, sellers, landlords, tenants and agents rather than just online products.
Expect therefore to see more work being done by Domain and Realestate.com to set themselves up as a one stop shop for making it easier to buy, sell, find, finance and live in a property as they seek to move closer to the transaction and take more revenue from it.
And in this space, it’s all about the funding and scale. We have long since left the space where agents can take on the portals with their own smaller offerings. Even smaller sites like OnTheHouse will struggle unless CoreLogic can inject some serious investment into it which it shows little sign of doing.
The battle of the deep pockets
“The deep pockets are winning,” DelPrete says. “The new models shaking up the industry are not new ideas. They’re doing what’s only possible with lots of money and deep products to fund and promote it. These are not scrappy startups making a dent. It’s all coming with huge amount of investment.”
So under DelPrete’s assessment, the portals do not want to disintermediate or dispose of agents. But they do want to direct and capture the entire property and finance ecosystem so they get as many bites of the cherry as possible.
Content marketing strategist, researcher, journalist and presenter specialising in the real estate industry. I'm passionate about proptech, digital disruption and all things property, big data, leadership and entrepreneurial ideas, have an MBA and specialise in social and digital media content creation and automation.