Reader, thinker, and frequent commenter Sam DeBord has written a rebuttal over at GeekEstate to my declaration of vindication re: IDX = Syndication:
IDX creates efficiency for brokers, which increases financial profitability for the group as a whole. Syndication is a less-efficient platform in terms of overall brokerage profits. Real estate is, on an annual basis, similar to a zero-sum game. There are only so many transactions, and commissions, that will occur based on the market. Financial profitability is dependent on earning as large a portion of that commission pool as possible.
Read the whole thing.
I think Sam’s written a thoughtful rejoinder, and introduced a hitherto unexamined argument: that IDX increases financial profitability for brokerages. I’d like to delve into that a bit.
I suppose you have to be a real geek about real estate industry stuff, but I do think this is an important topic for brokers, MLS, and even agents. You may be on the receiving end of some letter from a “copyright enforcement company” demanding thousands of dollars for unauthorized usage of photographs.
I’d listen, then read Brian’s post, and think about a strategy for dealing with this important issue.
This is one of those posts I write from time to time to figure out what I think about an issue. For now, that issue is trying to discern the possible direction of the residential real estate industry in the U.S. If you’re an agent and only care about something that will have a direct, immediate impact on your day to day business, I’d skip this post and go read this and this instead.
Basically, what I’m wondering is if the bull case for Zillow — that it will someday be worth $50 billion, as its largest investor has suggested — has any basis in logic. There are a whole lot of very smart Wall Street folks who think that Caledonia and others are simply out of their minds. A lot of brokers, agents, and industry folks would agree. If I had a nickel for every time I read or was told, “Zillow is worthless without our data”, I could retire now and buy that ranch I’ve been wanting ever since moving to Texas.
So for this post, I’m going to look at what has to happen in order for Zillow to be worth $50 billion at some point in the future. This doesn’t necessarily mean that I am bullish on Zillow. (And I own zero shares of Zillow or any of its competitors, unless one of my funds owns it without my knowing about it.) I’m doing this because trying to make the bullish case for Zillow results in some really interesting thoughts/observations about the industry as a whole.
James Dwiggins, CEO of Nexthome, has become one of my favorite commentators on the state of the industry. He’s extremely smart, has years and years of experience as a broker and now as a franchise operator, and is without question one of the tallest men in the real estate industry. (Maybe Walt Baczkowski, CEO of San Francisco Association, and Curt Beardsley of Zillow might give James a run for the height award… but that’s about it.)
Notice that James is sitting down, because if he were standing, his head would be out of the frame of the photograph. Anyhoo….
His most recent article for Inman is entitled “Zillow Group’s Game of Chicken” (Inman Select only) and lays out a few things. The most interesting of them is his recommendation for how Realtor.com, now under new management, could “get competitive with Zillow Group”:
Start a national Realtor advertising campaign called: “It’s your data, and, therefore, those are your leads.”
Showcase all listings on the site immediately — or, to put it another way, remove all competing agents from each listing. Make Zillow Group’s business model more contentious than it’s ever been. Send all buyer inquiries directly to the listing agent. Display the listing agent’s photo, contact information, social media links and brokerage information, and make it all extremely Realtor-friendly.
Advertise these benefits extensively to the Realtor membership. Sure, Realtors will need to pay for additional products and advertising opportunities to make up for lost revenue, but not when it comes to inquiries on their listings. The Realtor community would start to rally around realtor.com if everyone were receiving these benefits. (And Realtors would consider pulling their data from other sites that don’t follow suit.)
Provide the traffic data on every listing back to the agent, brokerage and franchisor. Give it to them in different formats and make it easy for the agents to provide this information to the seller in traffic reports. Use ListHub to your advantage — you already have the product.
Put a home value estimation tool on the site. Make it extremely Realtor-friendly — in other words, make sure the consumer truly understands that it is an automated tool and simply a starting point in determining a home’s value. Show a percentage range of expected accuracy by ZIP code.
Ask the consumer to create an account on realtor.com to receive an actual CMA (comparative market analysis) from a local Realtor to help balance the automated valuation. Realtors can pay for this service to receive exclusive seller leads. Realtors need to be the focal point of home valuations, so give the consumer an estimate and follow it up with a real CMA or multiple. By giving consumers an actual CMA, Realtors increase their value proposition, and they will love you for it.
Go read the whole thing if your’e an Inman subscriber. Become one if you’re not. (Go go gadget subscription model!)
I suppose it’s up to curmudgeons like me to point out the obvious. Well, it’s obvious to me at least.
I just had a fascinating conversation with Victor Lund of WAV Group who is spearheading the Broker Public Portal effort. We discussed a variety of topics from governance to equity to internal politics, shape of the industry, competitiveness, Zillow, Trulia, brokerages, etc. etc. It was awesome, and my thanks to Victor for making the time.
One thing that really struck me in the chat, and what I thought I’d write about, is just how much of a Adam Smith worshipping capitalist pig I am. I believe in the social benefits of private interests, the efficiency of the profit motive in bringing wonderful products and services to the world, and in short, that greed is good.
Now, in everything that follows, one caveat: Victor was not representing his own opinions, but reflecting the opinions and thoughts of the brokers and MLSs involved in the BPP conversation, as he should be, when he’s leading the PR and communications effort for the BPP organizing effort. So do not attribute anything here to Victor personally.