On Friday, September 22, the Norris Group proudly presents its 10th annual award-winning black tie event I Survived Real Estate. An incredible lineup of industry experts will join Bruce Norris to discuss perplexing industry trends, head-scratching legislation, and opportunities emerging for real estate professionals. All proceeds from the event benefit Make a Wish and St. Jude Children’s Research Hospital. This event would not be possible without the generous help of the following platinum partners: HousingWire, Coach Fullerton, Coldwell Banker Town and Country, PropertyRadar, the Apartment Owners Association, the San Diego Creative Real Estate Investors Association, InvestClub, Las Brisas Escrow, MVT Productions, Inland Empire Real Estate Investment Club, Realty411, and White House Catering. Visit www.isurvivedrealestate.com for event information and tickets.
This week we are joined by Sara Bonert with Zillow to talk about technology disruption and how Zillow is working in the real estate market today.
Episode Highlights
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- When did Zillow start, and did they always work with listings?
- How did they build their audience and test their new products with them?
- How do they generate revenue, and what is their dominant source?
- Why would people choose one real estate listing site over another?
- What brands does Zillow own, and what do they plan to do with them?
- What is big differentiator between Zillow and other companies?
- What is the Instant Offer Program?
Episode Notes
Bruce and Aaron Norris are joined this week by Sara Bonert. For the last ten years she had various roles in sales. She was a broker in MLS services with the Zillow Group; and today Sara manages the operational and data side of the industry relations. She also leads Zillow’s tech connect programs, which helps agents, brokers, and MLS implement listing data feeds, set up traffic, and lead APIs.
Zillow opened in 2006, and Sara has been there the whole time. Time flies, yet also seems to be going slow and it is hard to believe it has been around for over a decade. Bruce is always interested in knowing when a business starts since there are times when you are influenced by certain things. When Zillow started in 2006, we were in the middle of the best real estate boom ever. Two years later, we are in the most devastating time ever. Bruce thinks the Zillow customer base went through quite a change during this time.
Bruce asked Sara about the first few years, who she thought would be a customer and who became a customer who she did not expect. They talk about listings on Zillow a lot, and interestingly for the first two years there were no listings on the site. It was only the Zestimates. They spent a lot of time creating a product that people would want to talk about at dinner parties, which was the Zestimate. This brought a lot of people to the site; and Zillow’s philosophy has always been where if you can build an audience, you can attract advertisers. They really used the Zestimate to build that audience. They got to a certain point where brokers, MLSs, and agents started to see how it was a great platform for them to put their listing. It also came at a time when it was becoming unaffordable based on the economy to run $1,000 newspaper ads. Being able to shift that money to the internet at an almost zero to low cost and get just as many leads was attractive to the customers.
They spent the first several years building the audience for the product by really looking at what the consumer, both the homebuyer and seller, wanted. This then got the buzz that Zillow started, and they could go back to the brokerage and agent community and tell them they had the audience and if they wanted their listings in front of it. They spent 2-3 years going out and getting a couple million listings on the site. It really wasn’t until 2008 or 2009 that they really had a product for agents to leverage the traffic in more than an advertising way. It is really interesting to think back that far in that they did not just start with a product, but they started with trying to appease the consumer in building that audience up. They could then circle back and see how they could help the agents leverage it.
Bruce asked how Zillow generates revenue today, including its dominant source. Sara said their most dominant is their premier agent program. They really see the agents who take a systematic approach to their advertising. Zillow works with the top 10-15% of agents in the country who are very consulting in nature and spending money on Zillow to generate leads. They then work with the software suite to cultivate and manage those leads. They have gone from sending leads through this program to being the front person for a lead sent from an agent. Sometimes they will help book appointments for the agents to meet the consumer and try to convert it. This happens before the agents even talk to the consumer. They want to help agents inundated with leads and help them pick the good ones or get to the point where they are at the level in the sales funnel to get them belly to belly. The agent can then take it from here and close it.
70% of their revenues come from their premier agent program. They do have a mortgage marketplace as well where they help consumers connect with agents and mortgage lenders. They can say they are interested in a type of mortgage and remain anonymous in the first part of the process. The lenders then return the quote back to them, and the consumer can choose whether they want to expose their identity to a particular lender who has offered a quote and take it to the next step. They also make money on the rentals category as well as some new construction.
Aaron said he was fascinated going through her list of brands. He was especially interested when they launched realestate.com, which focused on first-time buyers and millennials. They could search by the monthly payment instead of the price. Aaron asked about the brands and strategies of why since some people confuse Zillow and Trulia and are not sure on the strategy. He definitely sees a strategy on sites like realestate.com, and Zillow has so many. Zillow has a lot of brands in their portfolio, and very typically they maintain those brands to the public. You can think of it like a cable station, such as Viacom who owns several different properties that an advertiser can choose to market themselves. As a consumer, you can say you like country music or any other type of music.
Similarly, with real estate you never really know why people like sites like Zillow over Trulia or others. Maybe they just like green versus blue. They want to continue to maintain all of these different brands that can appeal to what the various consumer like. Trulia has a lot of demographic and neighborhood information. Maybe you are somebody who is not as concerned about the house but wants to learn more about neighborhoods and lifestyles. Zillow tends to be hardcore data.
Realestate.com was trying to create a very visual experience, which interests millennials the most. It was really trying to be visual for the millennials and include large images of the property. StreetEasy is very specific to New York, and they have acquired a few rental sites to help fill the holes. Zillow now has one of the largest rental databases on the web. Consumers now have a choice in searching for real estate. Aaron noticed some purchases that started back in 2012. They have More Tech that focuses more on the mortgage space, Dot Loop that is more in the transaction space, and Bridge that deals with MLS listings.
More Tech is like a rate engine. It is used to aggregate quotes and serve them up. Zillow has the front end while More Tech has the back, and bringing the two together really provided the good consumer experience without having to build their own rate engines. This was an example of where it was easier to buy than build. Dot Loop was an interesting transaction. Zillow looks at how they can make sure Zillow is the marketplace where they are brining consumers and industry professionals together and ensure good customer satisfaction. This way they can make sure everyone is using the same currency in the marketplace. Once you make sure they have this good experience searching on Zillow and gotten connected to a good premiere agent, they want to make sure the good experience continues and the agent using quality software can close. They have the front end and pool of agents to match the consumer up web, and now they are arming the agents with good software to manage them.
Dot Loop had a great product, but once they were acquired by Zillow they had more resources to propel their product even further and faster. Having the investment that Zillow will put into that will really help arm these agents with a standard good piece of software to conduct the close. Dot Loop just released an awesome API to allows some of the transaction data to slow back into other services that agents and brokers might be using, such as a software service or CRM. They are really trying to help move the data around and get rid of duplicate entries.
Data is Zillow Group’s business, from marketing to the consumers. Sara said the bridge piece is what Zillow will focus on with brokers in the next few years. They are getting a lot of listings on the site directly from the MLS, and the data is sometimes coming to them in under three minutes depending on the MLS. They have 97-98% listing coverage in the United States, so the front end of it is great. Once you start peeling back the onion; if you have a broker with more than one MLS in which they need to enter the data with different business rules, you can imagine the difficulty. In California you can have up to 13 MLSs. As an agent, if you get a new listing and sit down to enter it into the system, you would have to do it this many times. It takes a lot of time and can be frustrating to the broker.
Zillow said they wanted to have great data on the site, but they needed to see how they could help get the listing online in a very efficient way. This was really where the bridge piece came into play. As a broker, you can have your own interface. You enter the listing one time, and that information will go out to any MLS you choose. Bridge manages the process of knowing the rules of each of the MLS. They know that one MLS only takes 18 photos, while another may allow over 20. Bridge allows you to take 50 photos, and it stores those photos. They also have unlimited video size requirements. You could take a 4K video and put as much data as you want into the system. Tell Zillow where you want the data to go, and they can take it upon themselves to know the business rules of each data destination point.
This is a huge benefit to the broker since it eliminates the data duplication entry into the system. It saves time and results in less error by having this one centralized place for data entry. You can get it out effectively and efficiently and store some of the data for the broker. You can store some of these media assets, and just recently they built a collaboration portion of it. If you are a broker and give a listing, you can go enter it and invite your photographer to take pictures of it. They can then put the photos directly into Bridge. In the past you would upload or email the photos, and the other party would have to take them and upload them into the MLS. Now the photographer can load them directly to the listing and work together with the broker on the listing in this one centralized place. The broker can then decide how they want them ordered and what photos they want or do not want to go to different places.
They are really trying to make better efficiencies in this type of data entry process, which ultimately helps everybody who displays this information to consumers as they are getting it faster and more accurate. You can then output that data back through the Bridge platform. If you are a broker and entered that data into 13 MLSs, they can send that data back to the broker. However, the broker would then have to de-dupe all that data to come up with one database they can use to send to an accounting software service or somewhere else. They can then be sent back one database of all their listings.
Bruce said it sounded like there would be the haves and have nots. You have the top 10-15% that are considered part of the premier agent program, and Bruce imagines they have used Zillow as a partner a lot. Bruce wondered how the other 85% view Zillow and if they participate at a different level. Sara said they do have contracts with every MLS in the country, and MLS is looking out for the best interest of all of their members. They want to make sure the listing agents is displayed according to how the MLS wants them to do it. You have this MLS as the watchdog for the larger group in making sure the basic needs and listing data is displayed in a proper way. They always hold Zillow’s feet to the fire to make sure they are servicing their members.
The top percent who are professional realtors do this every day and systemize their business to generate a large number of leads and follow up on them. Zillow probably does not think about the part time real estate agent as much as they think about the professional. The transparency the internet brings across any industry really exposes these part-timers and shows them they will have a hard time competing. If you are an agent doing 100 transactions a year and another does three; if they use a system like Yelp or other review systems, you will have a hard time competing. People want to see reviews. You do not want to go to a restaurant with only two reviews when you could go to one with 100 5-star reviews.
The internet in itself is exposing the cream of the crop, which is great for the industry. This means the consumers will be served in a very professional manner by somebody who spends a lot of time learning the market, the numbers, and the stats. They are not losing site of what is happening with the transactions. There is not nothing on the site for them as it is free to have your listings on Zillow and receive your leads and reviews from them. They have a Premier Agent app that is free to download which you can use as a free CRM. They have a lot of great software agents can use to take advantage of the big advertising programs. They definitely see more of the professional realtor.
Bruce next asked about the Instant Offer Program. He wondered what it is and how old it is. Sara said it is actually fairly new, only a couple months old. This is an example of the market saying there has to be an easier and faster way to sell a house. The concept has been around forever, but Zillow figured out how to digitize and bring it to the market in a mass way. You saw a lot of startups coming in and trying this, and Zillow saw it something sellers wanted. They are testing it in three markets right now where a consumer can input information about their home, its condition, any renovations they have done, and upload pictures. Zillow shares this with a pool of investors they put together and a premier agent.
The big differentiator with the Zillow program versus other companies is seeing what the investor can do for you; but if they want to list their house with an agent it might take a little bit longer for them to sell it, but they can get more money than an investor. If you need a quick flip, they can go that route. They can see all the consumer inside of the instant platform and all the fees that will be charged by investors and agents. In addition, they can see their net proceeds for each situation. They will call the seller and send them text messages to start a dialogue. They can choose the premiere agent, who will then take it from there. They can choose the investor, and Zillow steps in again to encourage them to use an agent if they accept the investor offer. If they do nothing, that is also their choice; and the offers are non-binding.
On the flip side, they do require the investor to use an agent. They have created this platform that is meeting the consumer needs and still keeping the agent as an important piece or consideration for the homeowner. Zillow is never acting as a broker involved in that transaction at all. They have always been in the business connecting buyers and sellers with great agents, and this is a huge financial transaction and another way to do it.
Bruce commented how she chose a group of buyers because of the size of the business, and he wondered if this will be opened up to an auction process where investors would get involved. She said she did not know exactly since it was fairly new. It has been going well and the agents like these seller leads coming in. What they are seeing is that the people submitting instant offers are very engaged and agents are seeing double digit conversions. They are seeing more people choose to go with an agent right now, and the tough markets are pretty small.
Sara Bonert will be one of our featured panelists at I Survived Real Estate 2017. The Norris Group would like to thank its gold sponsors for supporting I Survived Real Estate: First Lending Solutions, Guaranteed Rate and Nathan Chabolla, In A Day Development, Inland Valley Association of Realtors, Jennifer Buys Houses, Keller Williams Corona, Keystone CPA, LA South REIA, Michael Ryan, New Western, North San Diego Real Estate Investors, Northern California Real Estate Investors Association, Orange County Investment Club, Pacific Premiere Bank, Pasadena FIBI, Pilot Limousine, RealWealth Network, Rick and LeeAnne Rossiter, the San Jose Real Estate Investors Association, San Francisco Bay Real Estate Networking Summit, Sonoca Corporation, South Orange County Real Estate Club, Spinnaker Loans, Think Realty, uDirect IRA Services, Westin South Coast Plaza, Wilson Investment Properties, Inc. See www.isurvivedrealestate.com for event information.
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