As the Real Estate World Turns

There is something about Zillow that brings out the melodramatic in the real estate commentariat, both of the professional variety and often more hilariously, of the amateur variety. The big bombshell from yesterday, of Zillow acquiring Trulia, has brought out some of the finest performances in a drama and in a comedy.

It’s an odd thing to see both massive over-reaction and huge under-reaction. But such is life in the funhouse that is the American real estate industry.

I’d like to look at a few and just… well… comment, I guess. I don’t know if I have much useful stuff to add, except snarky maybe. Though to be honest, sometimes, snark can be useful!

The Award for Best Performance in a Drama… (Over-Reaction)

To be sure, the over-reaction from the professional commentariat has been somewhat muted. Sure, you had Brad Inman writing that the acquisition of Trulia by Zillow meant checkmate… but it wasn’t super-clear who Zillow was playing chess against, and what checkmate means. He writes:

In my view, this is checkmate. Soon, Zillow will control the chessboard, like Amazon does the publishing industry. The only meaningful consumer destination, Amazon, after many savvy moves, now controls pricing, merchandising, the data and the market. Soon, Zillow will control the pricing, the listings, the merchandizing and, for sure, the consumer.

Given Inman’s niche as the place where technology and real estate meet (see, e.g., Inman Connect), I suppose the conflation of Zillow with Amazon is to be expected. But this is over-reaction nonetheless. Although I find much to be amused about this rejoinder from Joseph Rand, Managing Partner of BHG Rand Realty in New York/New Jersey, he does get one thing absolutely right:

But Amazon is the wrong analogy. First of all, Amazon is a lot more dominant in its space, recognized in some parts as the “most favored brand in America.” More importantly, Amazon is a retail website — it’s a place you buy stuff. Zillow is not a retail website — it’s a place you browse for stuff. It’s not a “buying” website, it’s a “shopping” website.

Not only it Rand’s point obviously true, it raises questions as to why Zulia would want to do things like control pricing, listings, and merchandising. Neither Zillow nor Trulia has ever suggested that they want to do anything other than sell advertising to real estate brokers and agents. They’re doing all right with that business model, so far. Why would they want to get in the business of controlling pricing for housing when that makes them not a penny?

The response of the last day or so is, “Well, sure they say they don’t want to be anything else, but we know they intend on becoming a brokerage!” I would post links to the various blogposts and Facebook comments and such that shiver fearfully at such a prospect and shout “WE GOTTA TAKE OUR LISTINGS BACK!!!!111BBQ!!!” but… well, you’ve seen them as well by now.

This and more are all over-reactions. Yes, the acquisition of the #2 online/mobile player Trulia by the #1 online/mobile player Zillow is big news. It’s a lot of money. But the fundamentals of the business, and the fundamental problems we all face haven’t changed that much from Friday to today. They just haven’t.

I know the strong zaterade makes it hard for some people to trust anything Spencer Rascoff says, except that I happen to know that the penalty for lying for someone like Rascoff who heads up a publicly traded company is possible jail-time as the sweet plaything of some guy named BrahmaBull. So I tend to trust what he says in public about a material business factor. And here’s what he said about the acquisition and what it likely portends for Zulia:

“I would suspect that the way the brands evolve is that Trulia is considered to be a home shopping and rental shopping search engine that is highly transactional for someone who is in the purchase process, whereas Zillow tends to be a little bit earlier stage in that purchase process and in that consumer funnel because we have information that is quite relevant to home owners because of the nature of the Zestimate and other data that we have on off-market homes,” said Rascoff, adding that it is not uncommon for brands to have some overlapping features.

Oh My God! TWO separate brands that aim at TWO different niches of consumers!!! The world is endi… oh, nevermind.

So Zillow wants to be positioned higher up the funnel when the consumer is in the entirely tire-kicking phase, and Trulia wants to be positioned a bit further down the funnel when the consumer is ready to hire a real estate agent. Wow. What a revolutionary concept that is.

As Brian Copeland, a REALTOR from Nashville and a future President of NAR (if not CEO of NAR), puts it so eloquently:

Our true value is being a cumulative, quality professional through education, advocacy and relationships.  This is why none of the professionals I respect are fearful of mergers and industry change.  Their foundations are so strong, no matter what implied storm is about to hit, they will not only survive, they will thrive.

Couple that with the numerous assertions by both Zillow and Trulia people from the CEO on down that the real estate agent remains central and important and essential and so on and so forth and I think all of the agents can unclench their butts and go back to what they do best.

The Award for Best Performance in a Comedy (Under-Reaction)

On the other hand, there is a fair amount of under-reacting as well. Brian’s well-written post, while true as applied to real estate agents, actually falls into this category a touch. As we’ll explore below.

This Facebook status update from Steve Harney of KCM is another instance of under-reaction as well:


But the award has to go to the assembled notables quoted in this Inman News article. Here are a few of them:

“Realtors are still integral to the process of buying and selling a home,” NAR spokeswoman Sara Wiskerchen said in an emailed statement. “This proposed merger doesn’t change anything about the Realtor value proposition, and NAR remains committed to promoting and supporting the Realtor brand and Realtor value proposition to consumers.”


“A really great one, to be sure. But it’s just an advertising channel,” [Joseph] Rand said in an Inman News guest column. “And unlike newsprint advertising, where you had only one major paper in town, the Internet is lousy right now with startups that are trying to become the Zillow alternative. And all of them are about to move up one slot in the rankings” with the merger of Zillow and Trulia.

And my favorite so far:

Re/Max CEO Margaret Kelly said the franchisor has marketing agreements with both Zillow and Trulia, and views both portals as great marketing partners, not unlike newspapers were before the Internet age.

Consumers will always need high-quality agents and brokers, Kelly said. That’s where Re/Max comes in.

Despite the enormous growth of Zillow’s brand with consumers, Re/Max is not concerned about the firm as a competitor, Kelly said. But the 40-year-old global franchisor is wary of the firm’s possible expansion into the brokerage space. “We’re watching,” she said.

All three of these luminaries have one thing in common: not one of them is a real estate agent, you know the people they’re reassuring? The folks whose value hasn’t changed at all with this merger? (I suppose Mr. Rand may be, but given that he’s the managing partner of a very large regional brokerage with 25 offices and 800 agents… I imagine it’s been a few years since he’s had a buyer in the back of his car.)

All of these statements and reassurances are under-reactions in that while no one involved in any of this has said anything other than the continued importance of the real estate agent, the same is not true of other… ah… “entities” in the real estate industry.

Brian Copeland makes a sharp distinction between the “industry” and the “business”. He’s quite correct that the business of real estate won’t change. But to say that the industry of real estate won’t change seems to me to be a step too far in the direction of the pretty lies we tell ourselves.

The consumer may need the high-value trusted real estate agent (REALTOR or otherwise) no matter what Zulia becomes/does.

Does the consumer have the same need for the brokerage?

For the franchise? For the trade association? For the MLS?

In theory, the consumer has the same need for a high-quality broker who views said consumer as his client, to whom he owes not merely legal fiduciary duty (look it up), but also a sort of moral duty for service, and as a result, trains his agents to be the utmost in professionalism and knowledge and holds them up to the high standards he has set and enforces them ruthlessly. Sadly, as we industry geeks know, far too many brokers today are more interested in agent headcount, recruiting, and lead flow to affiliated businesses than they are to the consumer’s well-being. High-quality brokers still exist, but pardner, they come far and few in between in these dark times.

I have been suggesting now for at least two years that brokers, even of very large brokerages, should call a buyer or seller who closed a transaction with one of their agents just to ask “How did it go?”  If anyone has taken me up on that suggestion, I have yet to hear of it. (If you have, let me know, please.) I have heard a number of times just how ludicrous that suggestion is given how busy the broker-owner-manager-whatever is with all the things he has to do, however.

Does the consumer need the trade association that fights in his name in Washington DC and in statehouses and city council meetings all across this country? The true answer is quite possibly yes. But it sure would be nice if the consumer knew that. How would he find out? Especially when there’s a close to 9 in 10 chance that his trusted real estate agent hasn’t the faintest idea about these fights and these issues since she hasn’t ever responded to a Call to Action herself or learned about them or… you get the picture.

The MLS… well, I’ve written more than one post on that particular issue, so I’ll just skip it for now.

To suggest that the emergence of a dominant national portal which dwarfs the next-best competitor by a factor of 3 or 4 will change nothing in the industry is truly an under-reaction. One of the main benefits cited by Zillow and Trulia of the deal is that it would let them pool their enormous resources together to innovate faster and better. To think that would have no impact on the industry — not on the business, not on the agent, but on all of the other parts of the industry — is to tell ourselves cozy, comforting, and oh-so-pretty lies.

And contra Steve Harney, that does end real estate as we know it. My feeling right now, which is entirely intuition and speculation rather than logic and analysis, is that before it’s all said and done, somebody’s got to die.

So to my friends who aren’t real estate agents, but are part of the panoply of companies and organizations that make their living off of the real estate agent (I include consultants like me and #vendorwhores and trainers and coaches and assorted other hangers-on), I’ll offer the exact opposite advice I offer to the real estate agent: time to clench your butt tight and get to work figuring out how this changes things for us.

As in all things, time will tell. And the story it will tell will likely include both drama and comedy, both adventure and farce. It will, however, be entertaining whatever comes.


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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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