Zillow will replace Massachusetts MLS (Multi Listing Service) within 5 years
I just read a book by Zillow’s CEO and Chief Economist, It’ grabbed my attention on this snowy day in Boston. It’ was an easy to read and very informative. It does a good job of illustrating the power of data and how it can be harnessed to make the most informed decision when buying a Boston condo.
Is this book going to help you find your new Boston condo? Probably not. In fact, I hope not. Buying a Boston condo requires more than a popular data base website.
The negative review that I have on this book was how it relentlessly promotes its own web site, implicitly and explicitly, from start to finish. You’re left wondering: Is that it? Has Zillow really changed buying and selling of Boston condos? The web site provides useful insight, sure. But it hardly upends real estate, an industry that continues to operate on a 19th Century model. Does Zillow show us the final, evolved real estate industry of the modern, technological, information age? I mean, Rich Barton, the founder of Zillow is also the founder of Expedia, and lets face it nobody uses a travel agent anymore. So what is the Rch Barton up to? Hmm….
Back to the book, here are some interesting tidbits; did you know that proximity to Starbucks is a good indicator of better appreciation? (Chapter 4) Or that you should list your home between March Madness and the PGA Masters if you want the best chance at the best price? (Chapter 12) Fascinating stuff and worth considering when you are investing hundreds of thousands of dollars for a Boston condo. But what I want to know, what’s the big objective here. What is the future look like for buying and selling Boston condos?
ZILLOW IS SETTING THE STAGE FOR THE FUTURE OF REAL ESTATE
In its current form, Zillow doesn’t really do much in terms of bringing the real estate industry into the 21st Century. As the book makes clear, Zillow simply wants to attract as many visitors to its web site as possible. Why? Because Zillow makes money as a lead generator for today’s real estate brokers.
In other words, Zillow currently complements and feeds off of traditional real estate brokers. The more people who use the Zillow site, the more leads that Zillow generates, and thus the more money it makes. Zillow is built on web traffic, nothing more. And it doesn’t do anything to disrupt a long-standing traditional industry, because that industry is it’s target market. Even though that same industry is ripe for disruption.
Which is strange. Because the guy who co-founded Zillow previously co-founded Expedia. The web site that put travel agents out of business. Rich Barton is a widely recognized and highly regarded “disrupter.” His motto is “power to the people.” He believes that the internet can empower consumers in new ways that lead to better and more efficient ways of doing things. ”
Except that Zillow hasn’t. Not yet, anyway. It’s merely expanded existing opportunities (lead generation) for a long-standing professional industry that allows it to sustain it’s dominant market position. Nothing new there.
But what if Zillow is a work in progress? That would start to make some sense.
WHAT THE FUTURE OF REAL ESTATE IS GOING TO LOOK LIKE
Today, there are two ways to sell your Boston condo:
- FSBO – For Sale By Owner
- Traditional real estate broker system with MLS.
FSBO is about 8% of the market on how homes are sold. The traditional model still dominates the market. Why? Two reasons:
- Boston condo sellers want the professional insight and counsel of a real estate broker. especially regarding marketing, and with broker fees being pressured downward its becoming more attractive.
- With the majority of home searches conducted on the internet, its hard for an individual seller to compete with real estate office websites on the Google Search Engines.
Now here’s the crux of the whole thing. Zillow who also owns Truila, wants to dominate Google search in every major real estate market, and on every popular search term on Google. with that said, their purpose right now is getting as many eyeballs onto their sites in the short-term. Once that’s competed, it will move in for the kill. Zillow will push FSBO listings, and with MLS charging each Boston real estate agent $125.00 per quarter, they will create a platform that will be cheaper and more effective to the individual broker,than MLS.
Today, that real estate broker can exist, thanks to Zillow. With its brand recognition and size, it is used by a large number of home buyers. A “listing” on Zillow can lead buyers to the home, without paying for other agents to bring them. So a home seller can sell for a fraction of the cost, as they will no longer need to pay the 4% or 5% commisson their agent.
In other words, Zillow has positioned itself to be one of the successors to the multiple listing services maintained by cooperating real estate brokerages all over the country. And by positioning itself there, it provides the platform necessary for meaningful change in real estate. But until that change happens, Zillow will sustain itself by charging real estate brokers listing fees and internet leads.