For those of you that haven’t heard the news, Zillow is getting in on transactions. The residential real estate behemoth, which historically has driven the lion’s share of their revenue from ads and leads to agents, is now competing in the iBuyer space. The announcement last week was very careful to point out that they are not leaving or usurping the agent referral business that has been so core to their success. Further, they have said for now that they will be pulling in 3rd party agents on their transactions.
There are so many areas within real estate that this announcement could disrupt including appraisals, virtual tours, instant offers and more. The day Zillow announced the change, OfferPad, their iBuyer partner, announced they did not receive advance notice from Zillow that they were launching a competitive offering and responded to the news by announcing the end of their partnership. The point? The industry was immediately shaken. This is but one example of ramifications to the industry…and there will be more.
At Redi Match we are extremely investor focused, so naturally we want to consider how this will affect the investor market. Plain and simple, we believe this shift is going to position Zillow as a competitor to investors. They are poised to go after the seller market, especially those who need cash fast. This is the first area in which there is overlap with investors. That’s been an investor sweet spot for years. Investors are able to act quickly and, often are able to be flexible with terms that are attractive to sellers looking to move quickly. Whether it’s the ability to pay with cash, creating a shorter escrow or rent back options; investors have been poised to capitalize on sellers who need to sell quickly and have been able to use this to their advantage. Fast forward to today and welcome Zillow into the transaction. They also have the ability to be agile and fast. With deep pockets and enormous manpower, they could easily create a first mover advantage on purchases. Many investors and investment groups in the SRF (single family residence) space have a broker’s license and therefore potential direct access to MLS data. But think about what other data Zillow has at its fingertips.
Property listings aside, Zillow sits on a tremendous amount of data and this data allows them to make very quick acquisition decisions. The question is will this put investors at a disadvantage? Will Zillow be able to put themselves first in line as a buyer? With Zillow as a seller will they have a competitive advantage due to early insights into digital visits to a property, what photos are looked at most on a listing, where those looking at a property are located, and of course last but certainly not least of the advantages is the priority they can give to their listings in the consumer facing Zillow app. All of this digital intelligence will benefit Zillow in making buy/sell decisions. One area that has yet to be determined is what their investment (or buy) strategy will be. They’ve mentioned rehabbing properties to then quickly sell but is there a long term investor rental play as well (don’t forget about the Zillow rental app)? Once they start transacting investors will be able to see what they are up against. Perhaps it will lead existing funds, REITs and smaller investors to rethink their own investment strategy as to not compete with Zillow.
It will be interesting to see how their soft launch goes in the limited US test markets they announced, but undoubtedly it will expand quickly as they would not have shaken the market this way without grandiose expansion plans. This new arena for Zillow is huge and far surpasses the extremely lucrative market they already dominate. We intend to continue to provide investors and institutions with investment workflow tools, data access and insights well beyond property data so they too can make lightning fast investment, disposition and asset management decisions. Soon enough many real estate related companies will draw conclusions about whether the ‘new’ Zillow is a friend or foe.
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