Fighting for the future of real estate?
The recent Instant Offers test by property portal Zillow has the US real estate industry in an uproar. Local agents need to watch this space in South Africa.
US media company Zillow “sell ads, not houses”. But by launching a new product, Instant Offers, they have just waded into the complicated process of selling homes. The new initiative, currently in the test phase, allows home owners to avoid the traditional hassles and sell quickly.
Zillow might downplay this move as a test but whatever the law says about its role, the company is now, in effect, the broker.
Agents in the US have witnessed a number of endeavours to disrupt the real estate industry over the past few years. These try to limit the influence of estate agents by charging much lower fees or allowing consumers to contract directly. The Zillow test exacerbates all these fears.
Inman.com, a property news agency in the USA, reported that:
• Sellers can sign up for Instant Offers by providing several photos of their home and filling out information about the property, such as the number of bedrooms, features, flooring, painting history and the age of appliances.
• The home description then goes to the 15 Wall Street investors, who are either licensed as brokers or use a third-party broker license. The property details are also sent to participating Zillow Premier Agents, who will be asked to submit a CMA. Investors and agents have 24 hours to submit an offer, which expires in five days.
• Meanwhile, Zillow contacts the sellers to recommend they use an agent for the transaction. Zillow Premier Agents are signed up to handle CMAs and are prepared to work with Instant Offers sellers.
• The decision to use an agent is ultimately up to the home owner, who has no obligation to do so when going through the Instant Offers process.
• Home owners then have two choices: they can accept the offer and enter into a binding agreement to sell or they can hire an agent for a wider range of consumer offers. The investor offers expire in five days.
If successful, Instant Offers would diminish the role of an agent and could be the death knell for the industry as we know it.
Zillow found agents willing to support them in this test (possibly without due consideration to possible consequences) and the test results can be called positive. Inman reports: “The answers aren’t clear yet, but realtor and Zillow Premier Agent Veronica Figueroa’s experience with the test since Monday appears to prove at least two things: Instant Offers resonates with prospective sellers and it could put agents on their trail.”
Pressure from NAR
US estate agents immediately exerted huge pressure on the National Association of Realtors (NAR) to take a stance against this initiative. Chief business officer of Zillow Greg Schwartz explained that Zillow supports estate agents, with 70% of their revenue derived from agents. But it would be fair to assume that since the test results are positive, Zillow is unlikely to ignore them. If a portal as big as Zillow can succeed in replacing agents and acquire a share of the commissions, they are likely to do so.
In South Africa, it can be argued that leading property portals Private Property and Property24 are in an even more dominant position than Zillow. And it would be logical to conclude that they will be interested in the results of the test. Property portals are business ventures that have estate agents as their clients but it must be tempting to earn at least part of the commission on property sales.
Agents agree that 80% to 90% of their leads are derived from property portals. But gents’ fears of being disintermediated reached new heights with the current attempt by Property24 to acquire Private Property. This reportedly is still subject to legal issues and will eventually have to be approved by the Competition Commission.
Agents’ fears in this regard are well founded. Says Jan le Roux, CEO of Rebosa: “South African estate agents managed to gain control of their own print advertising, which one may argue saved the industry over the past decade or so. Unfortunately an opportunity to do the same as far as property portals are concerned did not come to pass.
‘It is, however, not too late to take steps to establish an industry-owned portal. It would be irresponsible of estate agents to allow unrelated business interests to end up in a dominant position and thereby dictate terms to the industry.”
Words: Property Professional