What Zillow’s iBuying Shutdown Means for Realtors
Zillow is not going away and iBuyer programs continue to disrupt. These are the facts, but there is a huge opportunity to step up and step into your own role as a real estate professional. Here’s what you need to know.
As word quickly spreads through real estate communities that Zillow is shutting down the iBuying arm of his organization amid heavy financial losses, we are seeing a roar of celebration among agents who have felt besieged and betrayed by the media company to deep pockets become competing broker.
While this is good news, it should also be a wake-up call for agents to think about and reconsider every decision and every dollar they spend as real estate professionals in a world of disruptors. Here are some thoughts on Zillow’s decision should means for agents.
1. Listing and Selling is Not as Easy as It Looks
The bottom line is that Zillow tried to get into the house flipping business and failed. He saw an opportunity to get a bigger slice of the real estate pie and made a point of selling the fact that he could do it “faster and cheaper” than traditional brokerage.
What he learned is that listing and selling real estate is not as easy as it sounds. What I teach our members, especially in the wake of iBuyer options like the Zillow offerings, is that the way to compete with programs like this is to bring the best of yourself to your Marlet.
Real estate professionals deliver real value to the transaction in terms of service, knowledge, resources, and a commitment to a client’s financial goals and best interests that just can’t – and should not – be tempted to reproduce badly with iBuyer plug-and-play systems which frankly harm consumers.
2. It was a good decision for Zillow
He was bleeding money at an exponential rate. As Inman reported, “While the company generated $ 1.7 billion in revenue in the third quarter of 2021, it also lost $ 328 million. Virtually all of those losses came from iBuying.
Zillow was a media company, a primary source of agents. They broke their own working model to embark on the turnaround. By cutting this part of their business, they will be more profitable.
Be careful, however, the more profitable they are, the more they can invest in other programs that can potentially harm agents. Their track record for doing so speaks for itself.
3. They forgot what made them
Zillow’s main source of income (more than 80 percent of its sales and 100 percent of its coherent profits) was derived from Premier Agent – which is Zillow paying agents for leads and advertising.
Instead of honoring that relationship and that income, they decided to fit into the deal as a competing broker. If every agent (or even the majority) stopped paying for Premier Agent, Zillow would go bankrupt.
When a business forgets where it came from, what built its foundation is the recipe for a failed business model.
4. It is always a beast to fear
Zillow is still a huge organization with very deep pockets. While this exit from iBuying is a waste, the company is already pivoting with products like Premier Agent Flex (requiring agents to pay referral fees for the leads they get).
This means – again like the Zillow offerings – that they fit into the transaction and into our business. They always want to take a bigger slice of the pie and will continue to seek out those “faster, cheaper and more profitable” options that will hurt both agents and consumers.
The big picture here is that realtors need to raise their own bar for professional standards, and instead of paying Zillow – their competitor – for services, invest in the SEO, sales and negotiation skills needed to ensure their Customers are protected from services such as iBuyer programs that cost them in return on investment.
When you dive into each of these programs like we did, you will see how huge this cost really is. Zillow does not “come in peace” as then CEO Spencer Rascoff wanted us to believe.
If you need more proof of this, understand that current Zillow CEO Richard Barton has already done to travel agents what he and his team were trying to do to you as real estate agents. He founded Expedia, which ultimately decimated the travel agent industry. They seem to be chasing your business.
In his statement to shareholders, Barton expressed concern about how consumers see Zillow’s post-iBuyer platform. This should be offensive to every agent who has spent hard earned dollars on the Premier Agent product. They built this business on the backs of agents they have no difficulty in betraying.
Gary Keller of Keller Williams got it right when he said: “Real estate agents are going to determine the fate of the industry with their dollar spending. If you write a check to Zillow, you are voting for a Zillow world.
Zillow is not going away and iBuyer programs continue to disrupt. These are facts. The same goes for the opportunity to step in and take on your own role as a real estate professional and shine the light on the real facts about these programs to sellers so that they know the real costs of their investments.
You have a chance to be the absolute resource for the people in your sphere and on your farm and ultimately guide them in making good decisions for themselves and their families. Don’t let them down.