Zillow to Acquire Trulia for $3.5B

http://dealbook.nytimes.com/2014/07/28/zillow-to-buy-trulia-for-3-5-billion/

by julio_iglesias • 12 years ago

270 162 12 years ago

dealbook.nytimes.com

themartorana3• 12 years ago

Does that leave any real competition in the space?

stevekinney• 12 years ago

I guess there is still Realtor.com, but I'm not sure how popular the site is.

chrisan• 12 years ago

Having just gone through a move in the midwest, we used realtor.com as the primary search site. Too many times we found Zillow/Trulia information to be inaccurate, either missing listings or just wrong data for bedrooms/sqft.

Realtor.com was very kludgy but it was leaps better than the local MLS website even if well below the UX of Trulia/Zillow

Both the listing agent of my old home and my buying agent in the new state asked for Trulia reviews when the process was over

/1-random-data-point

azsromej• 12 years ago

There's Redfin

NDizzle• 12 years ago

Redfin, but they don't do anything outside of the big cities. (Redfin doesn't service my area, for example - while I used Trulia to look at the school boundary markers and occasionally to look at houses.)

Zillow's site is crap compared to Trulia. Hopefully they acknowledge that and bring Zillow's data onto Trulia's stack.

Eiriksmal• 12 years ago

Ugh, amen! Zillow's interface is horrendous, both from a user and programmatic/scraping standpoint. I've been relying on Trulia for ease of pointing queries at their results pages, so fingers crossed that some of Trulia's sanity trickles into the Zillow site. That article makes it seem doubtful that this will do anything other than beef up Zillow's stack with Trulia's data, though. =/

jscheel3• 12 years ago

I've had trouble with Trulia's image serving for the past several months. It seems like their images just take forever to load, to the point that I switched back to Zillow.

krschultz• 12 years ago

Real Estate agents. Craigslist to some extent.

Generally speaking the biggest competitor to any innovate website is the status quo and apathy. Every startup I have ever been in had a harder fight against people that were reluctant to move to better technology than against our direct competitors.

tptacek• 12 years ago

Presumably, realtor MLS isn't so much as a "competitor" to Zill/ulia so much as the dominating incumbent.

88% --- eighty eight percent --- of home sales (presumably: owner-occupied single-family residence sales) were done using licensed real estate agents in 2013. A staggering amount of money is funneled through that profession, which as I understand it exercises guild-like control over the MLS databases.

rubyn00bie2• 12 years ago

Yes there is, but it hasn't gotten any HN love... :( it's called Househappy.org.

To really understand why it's different takes some knowledge of the industry. The biggest difference, the contact information on the listing is actually the broker who listed it! And it's free for anyone to post.

Oh... And it's the easiest to use! At least I think so :-D

Note: I work for Househappy

themartorana3• 12 years ago

I would have guessed the "Note" part. Gonna check it out!

smackfu3• 12 years ago

What's the advantage over Zillow? It seems to have less properties. The contact info doesn't really matter to me much, since I will almost surely have a buyer's agent who will just look the MLS data up.

nilkn• 12 years ago

Direct sources.

Here in Houston, nobody uses Zillow because their data is not reliably up-to-date. The city has a custom solution: har.com. It's not as pretty, but it's what all the realtors in the city actually use.

bane4• 12 years ago

Yeah, here in the D.C. area, nobody's using Zillow for much either since the "Zestimates" are pretty wildly off of actual market value and even in between homes in the same area.

For example, it puts my house at about $50k under my next-door neighbor's house, despite my home being larger, with more upgrades (about $100k worth), with one more bedroom and an additional full bathroom.

The identical house to mine, a block over, is $30k more than mine, but still $20k under the neighbor's home. A home another block away, similar to my neighbor's, but slightly smaller is actually on the market for $2k more than theirs.

Another house, identical to mine, half a block over in a different direction is Zestimated at almost $90k more than mine. And a similar house down the road is on the market for $75 more than mine.

My neighbors, directly behind me, have a model one size smaller than mine, and have done a tremendous amount of work on their home. Custom landscaping, high-end playground for their kids, fences, completely remodeled basement, and one more bedroom than my house, Zillow puts it at $10k under mine.

So within, basically 2.5 blocks, in a cookie cutter suburb, we have almost $100k variance, with Zestimates at least $50k under market prices in some cases, and $50k over in others, and smaller homes Zestimating to be worth more than larger homes next door.

Believe it or not this is an improvement from a couple years ago, but no reputable agent in my area uses Zillow for anything.

Trulia, by way of comparison, puts my house at $20k more than Zillow and flips the relationship of small/big houses so they make slightly more sense pricewise.

Redfin seems to be the closest.

joshuaheard• 12 years ago

Zillow doesn't work well in Houston because the sales price is not public record and they rely on Realtors providing the sales price voluntarily. By the way, HAR is not city-run. HAR is the Houston Association of Realtors and they manage HAR.com, the MLS for that area. It's a really good MLS by the way for residential real estate. For commercial, Loopnet.com is the best.

hammock• 12 years ago

There's Realtor.com, which is actually the better app vs. these two, since it is directly tied into the MLS database. There's also redfin.

IgorPartola3• 12 years ago

Having bought real estate, I can say that Zillow/Trulia are both a blessing and a curse. They are great in that you can see what's been listed for a while, scan a map, and generally put a pretty interface on house searches. This I imagine is their great advantage. I also found my mortgage company through Zillow's mortgage rate search.

Their big disadvantage is that their records are not updated as fast as the conventional MLS. The house I bought recently came on the market 7 days before I made an offer. It was not on Zillow even by the time we had the contract signed. The sellers, for whatever reason, put a very reasonable (possibly even low) price on the house, and I was at the end of the search, having seen enough locations in the area to know that this was a great value.

Another random personal experience: when I first saw Zillow I remember thinking "who needs real estate agents if you have all this?" Then I got an agent to buy my first house. All I have to say is "you do not know, what you do not know." While I do wish that agents simply took a set fee instead of it being a (very large) percentage of the purchase price, they provide a hugely invaluable service. I am not saying it's impossible to buy real estate if you don't have an agent; but if you can do it, you are probably a real estate agent.

themartorana3• 12 years ago

The MLS walked garden is the problem it seems to me many are trying to solve. If I see value in an agent, I'll hire them no matter what - but even with my current place, my agent sent me MLS listings and I crawled through Trulia and the like, and emailed him what I was interested in seeing. The place I ended up in I saw on Craigslist. That didn't negate the need for an agent, but his access to the magical MLS that we normals aren't allowed to have access to was inconsequential, and keeping it secluded seems silly at this point.

rahimnathwani5• 12 years ago

they provide a hugely invaluable service

What is that service? I'm not being snarky; I'm genuinely curious, as the structure of the industry (and fee level) is significantly different than where I'm from. I don't get why you need a real estate agent to help you buy.

andrewtbham4• 12 years ago

The fee varies by state, but generally is 6-7%. It's split by the buying and selling agent.

You definitely need an agent to sell a house. Because no other agents will show your house if you do a fsbo (for sale by owner). In fact, agents will actively discourage their customers from buying your house, even if they offer to pay the agent their half of the commission.

If you are buying a house. The main thing is they can open the doors of other agent listed houses and show them to you.

They have a tightly closed network, and it's held in place by laws. The NRA (national association of realtors) has a strong political lobby.

Here is a good run down of the situation on 60 minutes. It's old (2007 before bust) but not much has changed.

http://www.cbsnews.com/news/chipping-away-at-realtors-six-pe...

IgorPartola3• 12 years ago

They know real estate the way most people do not. The analogy here would be trying to write a giant enterprise piece of software you plan on supporting for the next 10-30 years without the benefit of any experience as a developer.

On a practical level, they can generally guide you through the very intense process of lining everything up to buy a property (this process takes months, and a whole lot of phone calls and paperwork). They know prices, and can tell you what something is worth. They can spot problems with the property before you get a (very expensive) inspector on site. They help you negotiate and buffer you from the seller and the seller's agent. This is particularly valuable since a good deal can go bad because personalities clash. They help you find professionals to work with (attorney, bank, inspector, etc.) if you want them to (all of these are up to you, but if it's all the same to you, then they generally have good suggestions).

bane4• 12 years ago

They bring lots of data and patterns to the table mostly -- because they spend all day every day dealing with it.

- If you tell your agent "I'm looking for a good investment property" they'll be able to tell you why this house on this side of the street is a good investment, and why the house 2 blocks away isn't.

- They can use this data during negotiations. You don't really know what price a home can be bought or sold for, but they can work off of a more educated guess. Should I try to sell my home for $x? or $x*1.25? They'll know how much and why. Should I try to negotiate down when buying or do I need to make a stronger offer? They'll know market conditions and can help you.

- They're familiar with all the oddball paperwork certain kinds of property deals have to work through. Like, are you buying a deprecated farm unit in an independent but not registered municipality that's been rezoned for mixed-use development but you'd like to rezone back to agricultural use? There's a form for that and they just saved you 6 months of back and forth with the state/county/city getting it sorted out.

- They can dig into property history and find out things that you might not know from looking at the property. Like, the foundation was recently rebuilt, or the property has a history of flooding and needs a sump-pump, so you might be looking at $20k in charges to put one in, or you can use it to negotiate down.

- If you are selling, connecting you into the broker network to find a buyer. It's a lot more than just putting something up on the web, a good agent will spend quite a bit of their time hunting down a good buyer for you.

Here's a longer list

http://ohiorealtors.org/consumers/184-tasks-agents-do-for-yo...

chaosphere2112• 12 years ago

I'm in the process of buying my first home, and it's been hugely helpful to have an agent. Services include:

- Tours of homes; seeing something online and seeing something in person is an impressive difference. Some houses look amazing online and terrible in person, or vice versa. Cannot possibly overstate the value of this.

- Negotiation; he's a professional negotiator, and he has years of experience negotiating in the exact market that we're buying in.

- Documentation; there's a RIDICULOUS amount of paperwork to file, and all I have to do is read/sign it.

- Inspections; he has handymen and inspectors on file, and knows that they're trustworthy.

- Knowledge; he's done this dozens/hundreds of times. He knows about how long things take, he has reasonable estimates of how much things will cost, and he has the patience to answer all of my questions.

hyperliner• 12 years ago

Some agents provide a hugely invaluable service.

If I am going to move to a new region, first I pick the area I prefer by renting a few months and learning the reality on the ground, then I grab the best agent based on specialization for that area, not a "generic" one for the whole city.

In my experience, the value of the agent is great there. But it lowers drastically if they are just "whole city agents."

Experience: moved to 3 metro areas in past 10 years.

mooreds7• 12 years ago

Disclaimer: I work for a real estate brokerage (but I'm a software developer).

Real estate agents can help in a number of ways (chaossphere2112 outlines a number of them), but one of the easiest ways to think about it is that this is a very large, complex transaction that happens rarely. That means that, while you could learn all the ins and outs of: - contracts (often regulated by the state) - negotiation (in whatever kind of market you are in--one favoring buyers or sellers - house value (both use and resale) - what can be changed about a house easily (finishes) and what is hard (layout) and what is nearly impossible (location) - neighborhood characteristics - typical home uses for people in your shoes now and in two years and five years, which might impact your purchase - the minutiae of a purchase (deadlines, appraisals, inspections, etc)

you might want to consider paying someone who does this as their job to help you out.

As for the 'pumping up the price' to get paid more, or 'making me hurry up' to get paid faster, there may be some agents that do this, but good ones are more concerned about the lifetime value of a consumer, which can easily run into mid five figures (if you move every 7 years starting at 28 and ending at 70, and buy the median house price (~200k) and use the same agent every time at 3% commission, that is 36k in commission).

It's dumb to burn a customer for a few hundred bucks when their LTV is ~40k (if you pay 210k for a house when it is really worth 200k, the agent earns 6300 instead of 6000).

pyoung• 12 years ago

I don't re-call the exact details of the situation, but an old acquaintance was able to sue a seller for breach of contract after the seller backed out of the deal at the last minute. The settlement was in the lower 5 figure range.

I guess the point is, for many people this transaction involves a significant portion of their net worth and and there are plenty of people out there who would happily relieve you of that money. I agree that the incentives are slightly mis-aligned when it comes to final price negotiations, but at the very least, any agent should be concerned enough about their reputation that they will have done the basic due diligence to ensure that you don't get fleeced. That alone would be worth the price.

eyeareque2• 12 years ago

Buying a house is a huge investment. Sure, you can do it all on your own to try to save some money but not without risks. I like to think of an agent as a sort of insurance charge to ensure I am not wasting my money and that I'm getting the best possible price on the best home on the market that fits my needs. I also don't want to spend all day looking for listings on my own. Had I not used an agent I wouldn't have bought the home I live in (and love) today since it didn't fall into the specs I was set on going after.

roel_v4• 12 years ago

Mine negotiated the price down another 5% (5%!) from what we would have put in as a first bid had we done it without an agent. (so if list price was 100, we would have been OK with paying 95, we would have started bidding with 90; with our agent, we closed at 85).

We did structure his fee in a way that he would get more commission if he got a better price for us. We ended up paying him 2x or 3x what he makes on a normal sale, and yet even if we had paid him double from what we did, we still would have made thousands using his services.

(This might seem to be in contrast with my other post in this thread about agents being financially illiterate, but the proposition of 'more money!' was so simple in this case, that it did seem to help. Anything more complex (opportunity cost, time value of money, ...) went over his head.)

personZ• 12 years ago

I'll give some counterpoints given that so many others are supporting real-estate agents.

1) Real-estate agents make money on sales completing. Their primarily financial goal is to complete the sale. Whether this means that you are overpaying (or, for a seller's agent, are under-asking), or are buying a home that isn't right for you...that often matters less than simply closing the deal.

2) Never trust or take a recommendation for a home inspector or other service recommended by the agent. The home inspector has the motive of keeping the agent bringing the recommendations, and this means avoiding having findings that will compromise the deal. Remember, the agent only makes money when the sale completes, so if they spool someone along to buy a house, convince them to overpay to get a sale done, and then bring in the "best" home inspector they know to close the sale, that inspector had better not throw a wrench in it. Always consider conflicts of interest, and there is an enormous one if you use the agents contacts.

3) The legal work -- the bulk of the paperwork, and covering your back legally and so on -- is, in many jurisdictions, done by a lawyer, not a real-estate agent who is only responsible for the most cursory of forms. And that lawyer and his team of paralegals, who do all of the title checks and bank processes and the final close...they get a small fraction of what the real-estate agent gets.

I find real-estate agents to be a profound anachronism. Sure, someone with neighborhood and pricing knowledge is of value, but is that worth tens of thousands of dollars? Is there anyone who would seriously argue that pricing makes sense?

thearn4• 12 years ago

when I first saw Zillow I remember thinking "who needs real estate agents if you have all this?" Then I got an agent to buy my first house. All I have to say is "you do not know, what you do not know."

Absolutely seconded. I rather extremely underestimated the entire process, and was very lucky to have a college friend of mine as a professional real estate agent.

ensignavenger• 12 years ago

About a year and a half ago I bought a home, after looking at dozens of houses. I found my home on Zillow, and I agree with your general sentiment about its strengths and weaknesses. In my case, my home had been on the market over a year so it had been on Zillow a long time, but I found a lot of homes that I wanted to look at on Zillow that were already sold or under contract and Zillow had not been updated for days.

I tried several agents before settling on one, and she was awesome helping my wife and I to tour dozens of homes during our search. Handling the actual negotiation/transaction was cake compared to the time and effort she put in taking us on house tours!

Of course, if the security problems could be solved, I would probably not have needed an agent for that :)

jscheel3• 12 years ago

I listened to Sami Inkinen talk about how proud he was that Trulia was the underdog to Zillow several months ago. I assume that the acquisition talks had probably already started, even as he was talking about this. I'm not incensed at this, I just think we need to be honest with ourselves. When your competition wants to buy you, then you've probably done something very right. But everybody has a price and Zillow obviously found theirs! Congrats to them, they've done a lot for dragging the real estate market kicking and screaming into the future.

smackfu3• 12 years ago

The thread from when this was just a rumor: https://news.ycombinator.com/item?id=8081176

tindrlabs• 12 years ago

Trulia was so much better then Zillow -- reminds me of Flipboard buying Zite.

genwin2• 12 years ago

I'm hopeful that Trulia won't get worse. I'd like to see the best of the two sites available in one site.

chatmasta2• 12 years ago

I interned for Redfin last summer. This is a really interesting space, and most people don't realize that Zillow/Trulia are operating drastically different businesses from Redfin.

Some background: The US real estate industry is broken up into regions (e.g. SF bay area, Orange County, Lake Tahoe, etc.). In order for a brokerage [1] to operate in a region, it needs to employ agents specifically licensed in that region, and have a real office there. Importantly, each region also has its own data feed of listings, called an MLS feed [2]. Amongst real estate agents, the MLS feed in each region is considered the primary source of real estate listings. If a house is not in the MLS, it's not for sale. BUT, only brokerages have access to MLS feeds.

There is no standard for MLS software. It's truly terrible. No joke, in some regions, the MLS service -- responsible for all real estate listings in that region -- is an archaic Windows program running on a desktop in some guy's Lake Tahoe cabin. Generally, MLS feeds are similar in structure, but there is no semblance of standardization, API, or developer-friendly solution for accessing it. Every region has its own MLS feed with its own structure, access restrictions, weird rules, etc. It's a nightmare to develop against.

Zillow and Trulia set out to solve this problem. They are listing aggregators, essentially filling the same role as MLS software. But because Zillow and Trulia are not brokerages, they cannot access the MLS feeds. So they have to get the data on their own. They depend on real estate agents manually inputting their listings into the Zillow/Trulia platforms. Nowadays, most agents do input this data, but that was not always the case, and IIRC Zillow/Trulia still only have something like 80% coverage compared to MLS feeds.

So Zillow and Trulia are simple listing services. They are basically advertising platforms for real estate agents. Their revenue model depends on agent referrals, paid listings, etc. They have no direct role in selling a house.

REDFIN IS A BROKERAGE. Redfin actually employs real estate agents who will help you buy a house. And instead of earning commission proportional to sale price (a huge moral hazard -- see: Freakonomics), they earn commission based on customer satisfaction. So Redfin agents are inherently motivated to work in the customer's best interest, instead of their own, which is getting the price as high as possible.

Because Redfin is a brokerage, it is entirely different from Zillow and Trulia. This is the reason that you only see Redfin in "some" areas (although they have coverage in most major metropolitan areas at this point), while Trulia/Zillow are nation-wide. When Redfin expands to a new area, it needs to establish an office, hire and train agents, file paperwork, etc. This takes time, but often when Redfin gets to a new area, there are already thousands of customers who have been waiting for them to launch there.

Also, because Redfin is a brokerage, it has access to MLS feeds. So Redfin gets its data directly from the source, instead of depending on real estate agents to enter their listings directly into its platform. Because of this, Redfin has 100% coverage in all the regions it serves, compared to ~80% (IIRC) of Trulia/Zillow.

So now it looks like the market will come down to Redfin vs. Trulia/Zillow. I'm curious to see how this plays out. On one hand, Redfin has a far more defensible model -- they have an office in every region, and actually make a lot of money from each listing. And they have a far better value proposition for the customer. Why would you use a real estate agent trying to pump the price as high as possible, when you can use one who will be paid entirely based on your satisfaction rating?

On the other hand, Zillow/Trulia have wider reach. There is nothing stopping them from opening a brokerage in their most popular markets and simply copying Redfin's model. But if they do that, they are already way far behind.

Personally, and I'm biased because I worked there, I think Redfin is going to "win" this battle. There's no reason why Zillow/Redfin can't coexist harmoniously, but I expect we will see Redfin making far more money in 10+ years than Zillow.

[1] http://en.wikipedia.org/wiki/Real_estate_broker [2] http://en.wikipedia.org/wiki/Multiple_listing_service

(EDIT since this is getting so many upvotes: I DO NOT SPEAK FOR REDFIN AT ALL, I DO NOT WORK FOR REDFIN. I worked there one summer last year.)

smackfu3• 12 years ago

Isn't the MLS run by the real estate agents that RedFin is trying to disrupt?

They depend on real estate agents manually inputting their listings into the Zillow/Trulia platforms

Are you sure that Zillow isn't just scraping the MLS data from broker sites?

uptown• 12 years ago

Zillow receives feeds from syndication services like ListHub and Point2, as well as direct feeds from MLS's.

chatmasta2• 12 years ago

Isn't the MLS run by the real estate agents that RedFin is trying to disrupt?

Redfin is disrupting the brokerage model of paying agents price-based commission. As far as I can tell, they are happy to use the existing MLS for listing data, and then put a nice interface on top of it.

Are you sure that Zillow isn't just scraping the MLS data from broker sites?

Oh, I'm sure they are. But they can't reasonably do this for 100% of regions, and have 100% coverage. My point about the coverage differentiator of Redfin is that in the regions Redfin serves, it has 100% coverage. Zillow claims to serve nationwide, but does not have 100% coverage nationwide.

cjensen• 12 years ago

I'm trying to buy a house right now in Fremont, CA. I can confirm that Zillow has errors and omissions whereas Redfin has entirely accurate data. Every Thursday my realtor sends me MLS listings; in every case, Redfin has the new listings.

swalsh2• 12 years ago

I bought my house through Red Fin. Though zillow gave some interesting data, the Red Fin experience was much better. In fact because the market is so competitive here (Boston) it was a big leg up.

Our house was listed on a Wednesday morning, with an open house scheduled for Saturday. Since redfin had the most up to date feed, i got an email alert right away. That night we got an early tour, and we put a bid in at list price immediately allowing them 24 hours to accept.

Before that we had put in 4 other offers. We kept getting beat by empty nesting baby boomers offering cash. Having that extra time was a big advantage.

imjk2• 12 years ago

Just out of curiosity, which Boston neighborhood do you live in? I feel like it's such a seller's market in Boston right now, I'll probably wait it out a year before I decide to buy.

bsirkia• 12 years ago

Just out of curiosity, do you know how Craigslist sources it's real estate listings? Does it integrate with the MLS or do agents list there separately?

zachanker3• 12 years ago

Real Estate agents post their own listings on Craigslist.

There are companies who provide the fancy HTML templates you see real estate agents use, but Craigslist doesn't allow automatic posting of listings.

zachanker3• 12 years ago

I worked at Placester for a couple of years and built the system that imports data from real estate agencies. When I left last year, we had coverage with around 90% of the MLS's in the US. Most of what you say is right, but some clarifications and context:

You don't need to be a brokerage to get access to the MLS feed. Each MLS has their own policies for how you can display the data, what logos, size and text needs to be shown on the page with their listings though. Which means it unrealistic to build Zillow/Trulia site off of MLS data. Placester builds them for individual real estate agents which is significantly easier for keeping the MLS happy.

Some MLS's are great and will give you access to the data without much hassle, others are not and you have to pay a lot of money. Even once you get access, you will get almost no technical help or useful documentation on integrating with them. Since MLS's are almost never related, you still need to talk to 300+ different companies in order to get coverage of the US.

There is a standard that most MLS's follow for their data, which is called RETS [1]. I would say about 80% of MLS's use RETS, the problem with RETS is that it's a standard in the same sense that CSS was a standard 10 years ago. The original library I wrote for RETS [2] is open sourced, and is littered with examples [3], [4] and [5] (to name a few), of inconsistencies across RETS servers.

If you can work through all of that, you're golden. It took us about 1.5-2 years to get the experience of seeing how MLS's work in order to simplify the integration process down to 1-2 days, with RETS typically requiring no (or minimal) engineering work.

[1] http://en.wikipedia.org/wiki/Real_Estate_Transaction_Standar... [2] https://github.com/zanker/ruby-rets [3] https://github.com/zanker/ruby-rets/blob/master/lib/rets/htt... [4] https://github.com/zanker/ruby-rets/blob/master/lib/rets/htt... [5] https://github.com/zanker/ruby-rets/blob/master/lib/rets/htt...

ngmaloney• 12 years ago

Thanks for all your work on ruby-rets! It works like a champ for pulling in listings from MLSPin and CCIAOR. As you mentioned, dealing with all the "certified" RETS vendors is a nightmare. For the uninitiated (and fortunate), RETS has its own querying language called DMQL which is inconsistent across versions and MLS vendors. Even trivial tasks like importing photos are handled with vast difference across MLS vendors.

Despite all the technical hurdles, given their resources, I would be shocked if Zillow and Trulia DIDN'T import the majority of their Mlsdata via RETS. Most MLS providers allow 3rd party access to the data feeds. There is no way all the listing data is re-entered via agents.

tnorthcutt• 12 years ago

Why would you use a real estate agent trying to pump the price as high as possible

I was surprised to read this, since I thought you'd hinted at exactly the opposite by mentioning Freakonomics. Isn't the Freakonomics argument that an agent is incentivized to instead sell the property as quickly as possible, regardless of the sale price? For instance, accepting an offer that is $10k under the listing price will cost the seller $9,400 ($10,000 * 94%), but will only cost the selling agent $150 (1.5% * $10,000). If the agent's time is worth almost anything approaching a respectable hourly rate for a sales professional, then they should pressure the seller to take the lower offer, as not doing so would likely incur significant time costs (well over $150 worth of their time) for the listing agent.

Is that view of things mistaken?

ssharp4• 12 years ago

Yes, that was the argument in Freakonomics and they're completely right.

The real estate market can be extremely receptive to low prices, so if you list your house very low, you're likely to sell it much faster. The bulk of the money the agents make will come from the part of the house that could sell very easily. If a house could sell for $200,000 today, but you have to have it listed six months before it could sell for $220,000 (which is unknown at the time, of course). The seller agent is going to make $6,000 of the $200k sale (3%) but will only make $600 more from selling it for an extra $20,000. And a lot of the time that 3% number is high. If they aren't a broker, they're splitting that 3% with someone else, so maybe the extra $20k sale price only nets them an extra $300 in their pocket.

When I was selling my house a few years ago, I talked with one agent that was recommended to me and he was so blatantly obvious in his desire to get commissions that I couldn't believe the people who recommended him failed to see that. He came in, refused to list the house for less than a 6% split (this is negotiable, 5% isn't uncommon at all) and wanted to LIST the house for around $8,000 less than what I actually sold it for a few months later. It wasn't that big of a house and was in an area with very affordable housing, so that extra $8,000 was high enough of a total % to make a huge difference.

Also, I'd venture that many people selling their houses still have a mortgage on the house, so the huge base commission the seller agent makes isn't even coming off of the owner's profit, it's coming of the amount they need to pay back the note.

bzbarsky• 12 years ago

chatmasta is talking about the _buyer's_ agent. In the US real estate market, the buyer's agent is typically paid a percentage of the sale price. So the buyer's agent has an incentive to convince the buyer to pay a higher price. They of course also have an incentive to convince the buyer to buy quickly, for the reason you said.

Oh, also the _seller_ is typically the party that actually pays the buyer's agent. Yes, this is pretty messed up.

philfreo• 12 years ago

Thanks for sharing. Homebuying seems like it could still use lots of disruption.

although they have coverage in most major metropolitan areas at this point

Sadly there's still a ton of major cities not covered :/ https://www.redfin.com/out-of-area-signup

mooreds7• 12 years ago

Yes, homebuying can use a LOT of disruption. Unfortunately there are many many players and change moves slowly. (Yes, Virginia, there are still MLSes that don't want to expose sold listings, as if that's some kind of secret.) If you're interested in this, the 1000 Watt blog (a real estate consulting company) has a lot more about tech and real estate: http://1000watt.net/blog/

guelo• 12 years ago

I just bought a house in the bay area, I tried multiple times to contact Redfin but never got any response. I ended up using a traditional agent but I was left wondering what is going on over there. Maybe they have more business than they can handle?

charmainefrank• 12 years ago

Good afternoon,

I am the Bay Area Manager here at Redfin and wanted to extend my apologies for the lack of service you received. Would you be willing to contact me so that I can further assess the situation you encountered to ensure it does not happen again?

I sincerely appreciate your time and apologize that we let you down.

Kindly, Charmaine Frank Redfin Bay Area Manager charmaine.frank@redfin.com

lightblade• 12 years ago

There's also this: https://www.realscout.com

Although I'm not entirely sure how they operate.

rgbrgb• 12 years ago

This is a great analysis. I'm working on a real estate platform right now [1] and learning the ins and outs of data regulation has been a huge hurdle. As far as I know Trulia and Zillow use lagged and incomplete listings aggregators (e.g. ListHub) and a lot of realtors think their pay-to-play model is hostile to the industry.

To get realtor quality data as a non-brokerage involves convincing each MLS that we're realtor positive and won't cut out agents. There seems to be a lot of fear in this industry that realtors will go the way of travel agents if more tech is introduced. A few of the investor-types we've talked to have tried to push us towards a model that has that potential but, as a lot of people in this thread have noted, we think realtors are providing a lot of value that can't be commoditized so easily.

[1] http://www.openlistings.co/

Zelphyr4• 12 years ago

I also am hoping Redfin wins this battle but, in part, for a different reason. The model that Zillow/Trulia work on is rife with scammers. I almost got caught up in one myself on Zillow. And were it not for the bad PR they get that'd be more than happy to allow the scam listings since that only generates more page views for them.

Even notifying Zillow of the scam listing wasn't enough to get it removed. I had to keep replying to them by email and post on social media just to get them to look at the listing to see it was posted by a scammer. Which tells me they generally look the other way unless forced into addressing scams. Sure, they do some analysis on listing prices and alert you when its unusually low but that's clearly not enough.

encoderer• 12 years ago

And were it not for the bad PR they get that'd be more than happy to allow the scam listings since that only generates more page views for them.

This is really cynical and, honestly, just not true. Last year, for example, we (at Trulia) rolled-out enhanced rental fraud detection that, overnight, took down the number of published rental listings by a significant amount. And many of our metrics -- leads sent, value created for agents/landlords -- are functions of our listing count. We didn't remove these listings -- which nobody had flagged as spam -- because of some murky concept of bad PR. We removed them because we're building a RE platform, we want and need and strive for happy, repeat visitors. And because in the chicken-and-egg of a 2-sided marketplace, the answer at Trulia is clear: the consumer came first. We need happy, engaged consumers, not mindless page views -- banner ads are a small and shrinking share of our total revenue.

It's true that we as an industry -- and now potentially as a combined company -- need to continue to build more sophisticated systems to combat fraud. It's a topic here that gets a lot of discussion and mindshare, and there has been more than one fraud-related innovation to come out of our quarterly hack-weeks.

cookiecaper3• 12 years ago

What would happen if Zillow started to compete against MLS and tell agents to use it as the primary source of data? This sounds like it would deprive Redfin of one of its main advantages (direct MLS access) by circumventing the problem entirely, and also provide Zillow the opportunity to charge for API access to that data feed, which other developers could build their own apps against, further obsoleting the disjointed MLS system. If they already have 80% of real estate agents double-entering the data, they should be able to find a way to get them to say "We don't need that stinky old MLS anyway".

Is there any reason this couldn't or shouldn't happen? It sounds like maybe there is some regulation that involves MLS that might make this difficult.

eyeareque2• 12 years ago

I honestly thought that all three sites were basically doing the same thing. Thanks for the insight, this was actually very informative and interesting to learn.

lsc• 12 years ago

BUT, only brokerages have access to MLS feeds.

A long time ago, I worked for a small real-estate ASP. Now, their target was websites for realtors. They didn't have any direct-to-consumer stuff. Real-estate agent and you want a webpage? give these folks $20-$100 a month, depending on features.

My understanding of our model was that we got access to the MLS data in the customer's name, then wrote scripts to go from the format that one MLS used to our format and let agents from that area list stuff on their website.

Now, while I was there, we didn't have any kind of cross-region search setup, and maybe there would be a legal barrier to doing so... but they sure did have a whole lot of MLS data.

That's the thing. Yeah, every MLS uses a different format, but from experience? once you get in the swing of it, you should be able to write import scripts for several different MLS formats in a single day. It's not actually difficult work. Most of them were some variant on CSV or XML, and the customers are super tolerant of errors, because the MLS data itself was full of errors.

I guess what I'm saying is that at least getting all the MLS data isn't as hard as it looks. I'm not saying it's trivial, but it's the sort of thing, I mean, legal barriers aside, that I could do in a few years with me, a PFY and a salesperson who has real-estate contacts. I'm sure that if you had competence and money, you could do it in a reasonable amount of time.

wdr1• 12 years ago

So now it looks like the market will come down to Redfin vs. Trulia/Zillow.

I think that's a terrible mindsent. As a recent homebuyer, I can assure both Redfin & Trulia have a shared adversary: the existing full service broker syndicate in a given city, often deeply entrenched.

I started my home search using Redfin, used them for 6-9 months & put in offers+counter+etc on 3-4 different houses. We saw a lot of places via open house & were surprised how hostile the seller's broker would be towards us on hearing we were using Redfin.

In fact, one agent actually flat out said if we made an offer, she wouldn't bother taking it to their client because we used Redfin. That's actually illegal in my state, so I asked her to clarify. I think she knew I knew at that point & back tracked. Still, my wife was so insulted, she stormed out, refused to see the house, and refused to see any other listing listed by that agent.

zeeshanm• 12 years ago

Market Leader - a company that was acquired by Trulia - provides tools to real estate professionals for obtaining leads. They have local MLS data integrated into their system for easy access to listing data. Not sure if this is entirely true you'd have to be a brokerage to access MLS data.

carlmcqueen2• 12 years ago

A different article, which I'm having trouble tracing back now, mentioned that this acquisition is more like the same company owning match.com and tinder.

Does anyone know if the intention to leave both up?

article: http://www.bloomberg.com/news/2014-07-28/zillow-to-acquire-t...

"Rascoff said in an interview that the deal to buy Trulia signals that Zillow is creating a portfolio of online real estate brands, which lets the company appeal to the broadest audiences and attract the biggest set of real estate advertisers. The strategy is akin to how IAC/InterActiveCorp (IACI) has multiple online dating brands such as Match.com and Tinder, he said."

Seems odd to leave both up when they're so similar.

beeskneecaps• 12 years ago

Well they bought hotpads + several others and left them up in this same way. Acquire, put on back-burner, repeat. Not a bad strategy, I suppose.

Nicholas_C• 12 years ago

It seems like every time I see an interesting deal Qatalyst Partners are involved (Priceline/OpenTable, Elance/oDesk, Yahoo/Tumblr, probably some more I'm missing). Those guys get to work on some really interesting stuff.

hodgesmr• 12 years ago

Zillow 2013 revenues: $225M, profits: -$12.5M

Trulia 2013 revenues: $175M, profits: -$17.8M

jquery• 12 years ago

You would expect this from the two most innovative companies in the industry. Both companies are leveraging their revenue to grow rapidly. A concern for profits at this point is premature. Trulia was profitable years ago at a vastly smaller revenue number.

elsewhen• 12 years ago

profit isnt the only concern; the revenue numbers dont seem in-line with companies that have such high valuations.

LukeB_UK• 12 years ago

As someone from the UK, I've never heard of either of these sites.

Kind of amazing that a business that's limited to one country can be worth so much.

mtmail• 12 years ago

Nobody outside the UK knows Rightmove or Zoopla (the UK equivalent). Zoopla is looking for £1bil (1.7bil USD) valuation in their coming IPO.

fludlight• 12 years ago

Only when that one country has a GDP roughly the same size as the entire EU or ~6x that of the UK.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomin...

lcm133• 12 years ago

Don't sleep on Homesnap! * Snap a photo of any home to find out all about it * Similar to Redfin in terms of model and data access * Unique iPhone, iPad, Android and Web experience

http://www.homesnap.com

epc• 12 years ago

Curious how this impacts Streeteasy, which Zillow just bought some time in the past year. Streeteasy is the defacto MLS (in a sense) for NYC (Manhattan doesn't have an MLS, nor does Brooklyn. Uncertain about Staten Island, Queens or Bronx).

metaphorm• 12 years ago

New York City does have an MLS. Its run by the Real Estate Board of New York (http://www.rebny.com/content/rebny/en.html) and is called RLS (REBNY Listing Service).

Streeteasy simply never had access to RLS so they had to get their data from other sources, primarily from scraping websites and emails, as well as some direct data feeds from brokerages that agreed to work with them.

source: I work in technology in the New York real estate sector.

rgovind2• 12 years ago

All real estate news and websites are biased and always suggest you that buying a home is a god think. In the SF bay area, I hear real estate agents speak on the radio. Before recession, they said you should buy a home immediately so that rates may increase....Then during recession they say you should buy a home as rates have fallen to historic lows..for last 1-2 years, whenever you hear...they say the interest rates are low, so you should immediately buy it, irrespective of dynamics between interest rate and price of house.

I wish there was a website/service which actively debunks what real estate agents, radio channels are propragating.

carsonreinke2• 12 years ago

`god think`

femto113• 12 years ago

that would be the Freudian Slip of the weak

rgovind2• 12 years ago

Can you please expand...I missed any reference...if you meant one.

imjk2• 12 years ago

Yeah, it's hard to get a real estate professional to talk frankly about the market. Right now I'm in a market that I think is over priced, but you won't get that sense from any of the realtors here.

red_hammer2• 12 years ago

http://patrick.net/

Although I think he's overly pessimistic on housing.

ssanders82• 12 years ago

I trade stocks as a hobby and I was wondering what I'm missing here. This morning Zillow offered .444 shares of Z for TRLA. Currently (1:50 pm EST) TRLA is trading at only a 0.411 valuation of Z. What's to stop me from shorting Z and buying TRLA to lock in the difference as profit? It seems both have agreed to the 0.444 ratio. Is it a regulatory issue? What else would cause the deal to fail?

dev_jim• 12 years ago

1) Deals can always fall apart.

2) Shorting isn't free. It will costs money to borrow the stock. You have to borrow it for more than 6 months until the deal closes.

chollida1• 12 years ago

Look into merger arbitrage. Its a huge area that has spawned many hedge funds, including the one I work at.

The difference is the market saying the deal might fall apart.

Some issues with shorting:

- very limited borrow, not much more than 2 million.

- very concentrated borrow.

- the spot rate for us to borrow is 2-3%, but with such a small amount of float avaiable to borrow the chances are high that you won't be able to get any and you won't pay anything close to 3%

Here is a good primer:

http://www.barclayhedge.com/research/educational-articles/he...

scelerat• 12 years ago

Just adding some anecdata to the chatter about these sites and the experience of buying a home:

I began searching for a house in the East Bay about two years ago, culminating in a purchase in June 2013. The first year or so I was using Redfin, Zillow, and Trulia to track availability, prices and neighborhoods. While I got some good information, it wasn't until I started talking to an agent with about thirty years experience in the region that I actually got good leads. The listings on all of these sites seemed to trail the MLS leads she would get by days to weeks. I made several offers over many months, each one more than the last, each time watching the stock get thinner and bids climb higher. My agent was not only finding good potential properties, but also providing a lot of perspective and emotional support.

The house I ultimately bought was something she found via her network of colleagues before it even was placed on the market. I made a bold offer and gulped at what I was putting on the table, but in retrospect I was fortunate considering what's happening in the bay area housing market right now.

Maybe I'm a dummy, but I cannot envision going through the process without a real human pro providing guidance and leads.

bkjelden• 12 years ago

I think it depends on the market and the competitiveness. I also bought a house last summer, but in a smaller, much less competitive midwest market. I watched the buyer's agent walk out of the closing meeting with a check for several thousand dollars, despite my wife and I thinking she had been a net negative to the entire process.

sliverstorm• 12 years ago

The house I ultimately bought was something she found via her network of colleagues before it even was placed on the market.

That's my experience too. My agent notified me of a property that was "probably going to be sold". I liked the description; he came back to me a month later to say it was going to be sold. I took a tour a week later, prepared an offer a week after that, and submitted the offer the week after that- on the same day it was listed .

Suffice to say, I had "some" advance notice on this property! Without the agent, I would have been much too late to the party. I went under contract with the seller 12 hours after submitting my offer, competing against another offer that had been submitted that day.

mikeryan• 12 years ago

Funny I've bought two houses in Berkeley in the last 4 years (bought one, sold it, bought another) both times I found the Redfin data to be spot on, ie new listings every Thursday the same list I'd get from my agent. This won't beat finding an agent with a listing before it hits the market but the East Bay is hot, if I'm a seller theres no way I'm not putting a house on the open market.

The first house we bought my wife and I found on Redfin (we timed the bottom of the market - by luck - and bought in December of 2010) and had a friend who's an agent in SF just help with the paperwork.

The second time we had a Berkeley based agent (we worked with her to sell our house so she got our "buy" work as well) but again found the house ourselves on Redfin. During our 4 month search our agent never got us a lead that wasn't on redfin. Truth be told if we buy again we may go the Redfin route, we really didn't get a ton of value from our agent on the buy side of our transaction. No way I'd sell a house without an agent however.

balor1232• 12 years ago

A question for the RE insiders here. What restrictions are there for building services off Redfin/MLS and Zillow listings?

Am I allowed to blog about listings or do I need to be an agent to use image and listing data? I get mixed opinions elsewhere about whether this falls under fair use.

I notice that Redfin provides OpenGraph annotations but the TOS disallow sharing. Am I permitted to share on Facebook, Pinterest, etc? What about on other websites? Is it possible to build a vertical search engine based on these details?

w44• 12 years ago

You need an attorney for these sorts of questions, not a real estate insider. These are IP and contract concerns, not real estate concerns.

Cybernetic• 12 years ago

It will be interesting to see how the home value estimates play out. Zillow and Trulia each have their own methodology for determining a home's value and the disparity between the value of each service lists can be significant.

I purchased a home two years ago in Portland, OR (South East). At the time of my purchase, its price on Zillow was listed as ~$70K less than it was appraised for (I had two appraisals and both were within $1K of one another). Trulia listed the value within $1K of the two appraisals.

In two years time, the value on Zillow is listed as the original purchase price. On Trulia, the value is ~$60K more (it is based on an average appreciation of 8% annually of homes in my neighborhood).

I know a home's value is only what someone is willing to pay for it, but the disparity in estimates between those two services has always bothered me.

Jemaclus• 12 years ago

Most of the difference is likely just a matter of data. If Trulia has better data than Zillow, their estimate will likely be closer to reality. There is the added difficulty of coming up with what's basically one methodology that has to work everywhere. My guess is that if you're in a funky place, like on the border of two neighborhoods, or if you're in a rural area, your estimates are likely to be further from reality than if you live in a cookie-cutter subdivision or in a downtown area.

The point is: yes, it's frustrating, but it's also complicated.

bjorns• 12 years ago

My first reaction was this headline has to come from a markov chain built out of Business Insider and My Little Pony.

Zillow to Acquire Trulia for $3.5B

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