Zillow has really been making a lot of headlines lately. They say that there is no such thing as bad publicity. However, I’m sure Zillow would prefer that some of its current headaches would just go away.
I won’t speak directly to either of these situations at length except to say that I personally thought it was only a matter of time before Zillow attempted to become an arms-length broker. As to the Zestimate suit, I was surprised something like that didn’t happen sooner.
For the public, Zillow was love at first sight. All the real estate porn you could possibly want to see, from any city or town in the US, any time of the day or night. Better still – free “estimates” without having to call a slimy real estate agent!! What more could anyone want?
Meanwhile, heartwarming TV commercials pop up everywhere showing how Zillow can find you the home of your dreams with nary an agent in sight.
The trouble is that the public is blissfully ignorant of several facts. The Zestimates were (and are) junk and many of the listings are inaccurate, already sold, expired or otherwise unavailable. The premier agents are not necessarily the best “local experts”, they qualify for their position by having the deepest pockets.
Getting beyond what Zillow actually does, most people seem to forget that viewing a listing still requires an agent. Let’s not even get started on what it takes to actually buy the home, once you’ve found it. The actual real estate transaction is a friction-filled process that is not getting streamlined by an algorithm any time soon.
Zillow is admittedly good for some things. I tell my buyer clients that if they want to look at the general national market, Zillow has some interesting data. The same holds true if they are just starting to explore a town or city. For broad brushstrokes, Zillow has information. For the nitty gritty – not so much. Others, like Bill Gassett, have a better opinion of Zillow than I do, but they are so far off the mark in my neck of the woods, I can’t be as kind.
The real estate industry has done a terrible job at educating the public on these matters and we must shoulder part of the blame. Further, we have done an even worse job of educating ourselves. How can we clarify these obvious flaws, when we are part of the problem. We advertise on Zillow, put our listings on Zillow and promote ourselves on Zillow. Therefore, we are, in effect, in bed with Zillow.
We fell into the trap that was laid for us because we didn’t think ahead to where the next shoe would fall. As a result, many agents and brokers are hopelessly addicted to the Zillow lead machine and therein lies the heart of the problem.
Real estate agents and brokers are in good part to blame for the trap that they laid for themselves. When Zillow first appeared on the scene, brokerages and agents were leveraging the internet for exposure. And…if they did their homework, they were succeeding. Well-run blogs attracted armies of home buyers as well as a decent number of home sellers.
Then along came Zillow. Flush with VC for advertising and top-of-the-line technology, they easily beat out individual agents and brokerages in the search engines. This quickly started winnowing away at the source of leads that individual sites produced. Suddenly, anyone who was working with online leads was blogging more, posting more, tweeting more and working much harder for a whole lot less.
Then Zillow crooked their finger at agents with a come-hither look and said “We have LEADS for you!” The price (at the time) was right and stupidly, many fell for it. We posted our listings there and populated the site with content. This further fueled the decline of individual marketing efforts as Zillow monopolized the search engines making agents and brokers even more dependent on them than ever before. This, in turn, allowed Zillow to jack up their prices. It is the definition of a vicious circle.
Instead of saying “enough is enough” and walking away, agents and brokerages were now addicted. Like most addicts, they doubled down on their addiction. Those who could still afford Zillow needed MORE.
It didn’t matter that the Zestimates were crap, or that Zillow was taking advantage of everyone. If that was they way they got those precious leads into their in-box, it was all good.
For those who have no other means of lead generation, Zillow has become the crack cocaine of their business model. And it is very expensive crack indeed. In some markets today, the minimum amount that can be spent to be a premier agent is well in excess of $1000/month. To get quality leads that hit the sweet spot of 20% exposure, I’ve seen quotes in major cities that are in excess of $4000/month.
All that to be at the front of the line for lack-luster leads that have email addresses like CharlieBrown@aol.com and fake phone numbers?
Last year I wrote a post about Zillow and ran the numbers using their own calculations. Even using Zillow’s numbers, which are decidedly optimistic, agents are still forking out about 30% of their gross sales income to Zillow.
That’s a lot of cheddar for a company that doesn’t put one toe outside their nice clean air conditioned offices to do the nitty-gritty work! Not to mention that when you calculate agent expenses and splits, the numbers are even worse.
Worse, still is the fact that agents and brokers are paying per impression. So, agents pay whether they close a transaction or not. While Zillow gets paid no matter what. In other words, the numbers could well be worse than advertised and the agent/broker has no recourse if they lose their shirt.
However, we got here, the fact is that we now have a giant Zillow monster on our backs. The Zillow monster serves neither the agent nor the public all that well. It’s the poster child of the useless middle man that people can’t seem to do without. The cure is obvious. Everyone in the industry has to act collectively and pull their listings and advertising.
Well, I’m not holding my breath. I was on Inman News and responded to an outraged broker who did a great deal of lead generation with Zillow. She resented the fact that their new instant offers were biting the hand that fed them. So I asked whether she was able to pull the plug and lead generate without Zillow. Not surprisingly, I’m still waiting for a response.
So here we sit playing a collective game of chicken with each other, hoping the other guy will be the first to pull the plug.
Please feel free to contact me anytime to request additional information or to set up an appointment so we can explore your listing or purchasing needs. I am easy to reach by phone, text or email. Or, if you just want to continue your search online, the links below will help you get started.