The headline was sensational, the subject near and dear to my cold heart: Zillow Aquires Trulia; Let The Real Estate Hunger Games Begin. So, Zillow and Trulia are on the path to become one. This is so incredibly romantic, I’d cry except that I know what the merger will mean: Nothing.
There is rampant speculation that this deal will mean trouble for so called “traditional” brokers. Some of the argument supposes that if these two online behemoths own the inventory, they can control the transactions. The easily convinced people who do not sell real estate but, instead, write online articles for a living, think that this means possible transaction fees for Realtors, with would potentially disrupt the entire home buying process, and the traditional real estate sales model that has existed since Esau sold his dad’s house quickly, before proper title could be pulled, will be a thing of the past.
Now, it is true that Zillow is a big name in real estate. Zillow posts values, without a single ounce of accountability, and they post them online for the world to see. Without licensing issues and ethics to follow, Zillow can indeed disrupt the real estate model of being accountable to one party or the other. While I have to work with a buyer or a seller, or both, and make sure that my opinions are proven correct over time before I will gain the trust of that consumer, Zillow gets to activate their algorithms and assign value to homes that it has never seen, will never see, and has no interest in. In theory, this makes them an objective bystander, but in practice it makes them an ignorant interjector, unnecessary and irrelevant.
But that’s how I see them, because I know they know nothing, and I also know that the consumer sees them differently. This is why people tell me that a $2MM house cannot possibly be worth $2MM, because Zillow has it’s Zestimate at $1.6MM. Do you know why Zillow has that Zestimate at $1.6MM? Because they don’t know the house. Sure, they know that the house next door sold for $1.6MM last year, and that the subject house has an assessed value of $1.6MM for tax purposes. But Zillow doesn’t know that buyers love that sort of house here, and that the frontage on the $2MM house is 101′, and the frontage on the neighbor’s house is 93′. Zillow doesn’t know that the extra 8′ allows for a two-slip pier, and Zillow doesn’t know that the only thing Lake Geneva owners like more than one boat is two. Zillow doesn’t know these things because Zillow is a robot, and nuance is lost on robots.
Still, there are excitable sorts out there that think this spells doom for the traditional brokerage. This is such a common refrain that a bunch of really smart, really rich guys in San Francisco just raised a whole bunch of their own money to start an online home buying website/app called OpenDoor. Never mind that there’s a broker in Massachusetts who operates under that name, and never mind that the broker in Massachusetts should probably start a suite against the San Francisco fellas on account of having their name stolen. The real magic here is that these smart, rich guys are going to disrupt the real estate model. In fact, they say they’re going to take the traditional 90 day home buying process and simplify it down to a few clicks. Voila!
I, too, would like to make the home buying process this simple. I, unlike them, know it won’t work, but I applaud their money-infused naivete. They say that the model will work in San Francisco, because in that town all one does is list their home and within 7 days it sells. I like the sound of that, and they do, too, that’s why they’re going to make a house-exchange of sorts, and you’ll put your home for sale on the site for $1MM, and some guy with as much money as the OpenDoor founders will buy it with a click of his mouse. It’ll be so much fun, this new way of buying real estate. And, if we’re only going to do this in San Francisco while in the giant bubble that is the current VC/tech boom, I’ll wager it’ll absolutely work. If we try this everywhere else, at all other times, it’ll fail miserably. But, but, VC’s like the idea!!
That’s what they’ll say. We’ll say it won’t work, because we’ve seen this game before. Why doesn’t OpenDoor matter? Why won’t the Zillow/Trulia merger mean much? Why will these things come and go, and change bits of the business model along the way, but never, ever do away with the traditional name-tag wearing, Cadillac-driving, cheesy-smile-havin’ Realtor? Because Autotrader.com didn’t get rid of auto dealerships, and Legalzoom.com didn’t force the retirement of all attorneys. Angieslist.com made the founding partners a whole ton of money, but did Angieslist wreck the home remodeling/service industries? No is the answer to all of those questions, because easier access to information doesn’t mean we don’t still need boots on the ground.
I would very much like to found a real estate start-up. Why? Because I would very much like to be very rich. My model? I’m going to start a website. That’s the first thing. I’m going to give the company a catchy, silly name, like HOMELuv or something like that. Two words mashed into one are always popular, and so is capitalizing things at random. So that’s my company, and that’s my website. I’ll offer homes for sale. You click on the home you like, and then click the “SHOWING” button. Then, I’ll have a ROBOT meet you at the house during the showing, and that ROBOT will put a really heavy sell on you. For instance, if you say, “I don’t like this refrigerator”, the ROBOT will say, “You should like refrigerator“. If you say, “but, I don’t”. Then the ROBOT will say, “Showing terminated“, and then I’m not sure what will happen because I haven’t developed this part of the software yet, but perhaps the ROBOT will either use roboty force to make you sign a contract, or the ROBOT will terminate the compromise, or the ROBOT will just get in its ROBOT car and slam the door before driving back to the office to throw pencils into the ceiling tiles.
Autotrader.com had the absolute best shot at turning the automobile sales industry on its ear. Search car, see car, click to buy car. Simple! Autotrader controls the inventory, and does not have to compete with MLS systems. Autotrader generates ad revenue, membership revenue, and perhaps transaction revenue. Autotrader should have ruined the automobile dealership model. There shouldn’t be shiny dealerships with sign-spinning-monkeys out front ($1 for the reference), and there shouldn’t be cheesy salesmen waiting for you inside on those faux-leather chairs. There should, instead, be cold warehouses full of cars, and when you successfully buy one with a few clicks of your mouse, the car should be delivered to you in a huge box, or wrapped in brown paper tied up with strings, or by a ROBOT. But what did Autotrader actually do? Well, it made it easier for you to find cars so you could go test drive them and endure the heavy sell for the maintenance plan. The industry didn’t change, and cars are static, simple products when compared to houses.
What to expect from all of this real estate “innovation”? More of the same. It’ll still be easy to find houses. It’ll be easier to see comps. There will be shinier and flashier websites. But at the end of the day you’re still going to be in my car, and I’m still going to tell you that it’s only dirty because of my kids.