Back in the proto-Internet era, I bid on a co-op. My offer matched that of another prospective buyer. I own the place today only because I didn’t go through a real estate broker. That made my offer 6 percent more attractive to the seller.
What was dumb luck in 1993 could rapidly become a no-brainer in 2006 as the Web begins to embrace the home real estate market. Currently, 77 percent of home buyers and sellers begin the process online, yet less than 10 percent of the annual $11 billion spent on real estate marketing is dedicated to interactive, according to the National Association of Realtors (NAR).
That’s about to change, quite possibly in time for the spring buying season, and not just because the U.S. DOJ has filed suit against the NAR. The suit challenges an NAR policy that obstructs brokers who use Web-based tools to offer better services and lower costs to consumers.
The Web moves faster than the wheels of justice. Suddenly, a plethora of new sites that facilitate (if not disintermediate) the buying, selling, marketing, and advertising of residential property have launched — some to wildly enthusiastic receptions. There’s PropertyShark.com, RedFin, Trulia, StreetEasy, ZipRealty, PropertyRover, and RealEstateAdvisor, to name a few. When the most anticipated of these, Zillow, debuted in beta last week, day-one traffic promptly crashed its servers.
Zillow, cofounded by Expedia founder Richard Barton, is a home-valuation tool. It claims its 2TB database holds information on 60 million U.S. homes, a figure the company plans to nearly double. Consumers can obtain an incredibly granular spectrum of data: historical value changes for individual homes charted over the past 1, 5, or 10 years; value changes for homes compared to the surrounding Zip Code, city, state, or even the entire country; every comparable sale in the area; satellite, aerial, and parcel views of properties; and data, such as number of bed- and bathrooms, square footage, lot size, number of stories, and year built.
Not only can all this information be obtained without an agent, it’s all free — not only of site registration, but of broker and appraisal fees. Zillow is ad-supported, and its primary advertisers are Realtors. Weichert, Real Living, Prudential California, and ZipRealty were on board at launch with banners. “The real estate industry should not feel threatened by Zillow,” insists Spencer Rascoff, CFO and VP of marketing. “They’re partners. In real estate, the agent plays a fundamental part of the transaction. We really believe that.”
Zillow’s value proposition to advertisers is very, very precise CPM (define) targeting. Advertisers can target a particular city, Zip Code, or price range (for example, a Realtor could only have his ads placed on pages with homes over $1 million). “[Targeting is] going to get down to the specific house level,” Raskoff told me, “people who only want to buy in a four-block radius.”
Are Realtors wise in the ways of online advertising? “Google has done a lot of the heavy lifting for companies like us,” said Rascoff. “The percentage of real estate agents that have bought a keyword and done any online marketing is probably in the single digits. Yet many are surprisingly sophisticated about real estate marketing. They’re blogging to establish themselves as authorities, buying keywords, advertising on craigslist, email marketing. A lot of that’s just begun to happen in the last year or two.”
Will Zillow license its platform to brokerage sites as an API (define), then? Rascoff says it’s a possibility and the company has already received inquiries. “We’ve had agents link to the site. If you’re an agent and want to seem smart, you’ll want to have something your neighbor’s agent doesn’t have.”
While Zillow provides critical information for home buyers and sellers, Seattle’s Redfin.com, an actual real estate brokerage company, goes so far as to enable buyers to make an offer online, negotiate terms, and coordinate a closing. The site has processed several offers, with one acceptance already. Customers earn two-thirds of the buyer’s agent commission for themselves, applied at closing. The company takes only a 1 percent commission. Redfin displays the potential savings on each listing together with two buttons: “see it” and “buy it.”
Another full-service residential brokerage company that likewise offers commission discounts to online users, California-based ZipRealty, launched PriceTrack this week. It displays a listed home’s complete price history, including the amount and date of each reduction. Users can see each time the price was dropped in the case of multiple reductions. In most regions, buyers can see how long each house has been on the market. Zip, which claims to be the most-trafficked national brokerage site, is among Zillow’s first advertisers.
An interesting facet of real estate arriving so late to the online game is how rapidly these sites and services are embracing Web 2.0. Collectively, they encompass meta- and local search, but also aggregation, RSS (define) feeds, user-generated content, and integration with APIs such as Google Earth.
The Internet is about to radically redistribute the $11 billion spent on real estate marketing, and likely some of the $60 billion real estate agents and their firms receive in commissions. This should be interesting.
Rebecca is off this week. This column ran previously.