A battle is brewing over the nation’s real estate listings. A new generation of websites are competing for clicks and cash in a fight that promises to transform the way houses are bought and sold across the country.
In recent years, Zillow, Trulia and others have built flashy sites that pump out up-to-the-minute housing data and listings next to ads promoting local real estate agents and brokerages. These sites and apps have largely replaced traditional marketing tools, including newspapers and magazines.
If anyone doubted the value of such third-party listing aggregators, as they’re known in the industry, there’s growing evidence these digital powerhouses have become serious players. In July, Zillow and Trulia announced a merger agreement that’s expected to be approved by regulators later this year.
And this month, News Corp., the publishing arm of Rupert Murdoch’s media empire, plans to dive wallet first into the online real estate business by purchasing Move Inc. for $950 million. Move operates Realtor.com, a real estate listing site and competitor to Trulia and Zillow that’s owned by the National Association of Realtors.
For insights into the significance of these deals, we talked with Brian Larson, managing partner at the Larson Skinner PLLC law firm in Minneapolis, and former president and general counsel for the Regional Multiple Listing Service of Minnesota.
Q: News Corporation’s acquisition of Move is being called a “game changer,” do you agree?
A: I think it really depends on your perspective. I don’t see this radically changing things for brokers, but it restores Move’s viability as a competitor. I haven’t seen any argument that it will transform the way that business gets done. But if I were Zillow I’d say, “Now I have a real competitor. Now I have a reinvigorated Realtor.com.”
Q: Right now, there are more than 800 multiple listing services (MLS) across the country that feed their listings to Zillow, Trulia and other sites through a division of Move. What if News Corp. tries to end this relationship?
A: That would have a profound effect on the market. Realtor.com gets their listings usually by direct agreements signed in the late 1990s with nearly every MLS. Back then, they were the only website that had any buy-in from the Realtor community. Zillow and Trulia receive data from most MLS’s through Move’s ListHub division. If ListHub shut down tomorrow, it would disrupt much data flowing to the other portals, which explains why Zillow and Trulia are scrambling to get direct agreements with MLS’s.
Q: Some have speculated that the Move acquisition could ultimately diminish the National Association of Realtors’ (NAR) influence over the site, do you think that’s likely?
A: That’s a gimme. NAR will certainly have less influence because NAR’s operating agreement with Move.com has been pretty restrictive and has prevented Realtor.com from competing with Zillow. For example, Realtor.com prohibits listing for-sale-by-owner properties on their site. I suspect that some of those limitations will be eliminated and that Realtor.com will be able to do things that previously would have been prevented by NAR.
Q: Citing concerns about the accuracy of the information that appears on these sites, a large brokerage in North Carolina recently pulled its listings from Trulia and Zillow. Edina Realty did the same thing a couple of years ago, but then reversed course, saying the accuracy of those sites had improved. Are there still problems?
A: Brokers really struggle with this. Some brokers want Zillow to have less accurate info because they want to be able to draw consumers away from Zillow. Some brokers say, “If you want accuracy, come to our site; we have all the up-to-date info from the MLS.” Others want accurate info on Zillow because they don’t want consumers to be confused. And there’s a tension among brokers about whether they want to be responsible for improving the accuracy of sites like Zillow. This does give you a sense of complexity about why brokers are struggling to decide.
Q: How do these third-party portals make money, and what will these companies do to justify the prices being paid for them?
A: Brokers and agents pay for enhanced placement and enhanced branding and enhanced access to consumers and their listings. Some might call it lead generation. An agent may pay as much as a couple thousand dollars a month; $24,000 a year might be a pretty significant portion of an agent’s marketing expenses.
Q: Is there consensus about whether such sites are effective, and whether such fees are justified?
A: It’s tricky. From the consumer’s perspective, they’re effective, and the value is pretty clear. But for the brokers, it’s harder to prove. Many brokers and agents don’t feel like the trade-off is worth the money. If an agent is paying $2,000 a month, they might not feel like they’re getting value. That’s a disconnect. Consumers are delighted, and why would they not be? But the brokers are anxious, and why would they not be? In the hearts and minds of brokers, Zillow in 2014 has replaced the newspaper of the 1990s as the hated entity that sucks all of their marketing money out of them.
Q: Now that Murdoch has helped reset the value of Realtor.com, is it likely agents and brokers will pay more?
A: Zillow and Trulia are publicly-traded companies and they will need to start making money. Wall Street will expect them to grow their revenues. So for real estate brokers, that means they’ll be looking for ways to get brokers to pay more money for what they do. Move.com will have to do the same thing. I do anticipate that all three are going to have to look for revenue outside the brokerage community. They can only hope to win so much money out of the brokers. Last week, a broker quipped to me that a parasite can take only so much before killing the host. For a long time, Realtor.com was the only game in town and, in the early 2000s, brokers hated them because they felt like they were over a barrel. Brokers now have the same energy about Zillow that they used to have about Realtor.com. They hate the market leader because it’s the one that charges them the highest fees.