For years, Zillow denied it had plans to become a brokerage. But the listings giant is doing just that, in a move it says will streamline its iBuying operation.
Starting in January 2021, the company said salaried agents will work with sellers who want cash offers for their homes through Zillow Offers. In those transactions, Zillow Homes will be the broker of record, the company said. To start, Zillow agents will work with homeowners in Atlanta, Phoenix and Tucson, with plans to expand the service to other markets later next year.
Previously, Zillow relied on local brokerage partners to represent it when it purchased homes. Zillow’s iBuying is a burgeoning piece of its business, and by bringing that work in-house, Zillow said it hopes to make the transaction smoother for homeowners.
“Many customers found the handoffs and the back-and-forth between the Zillow employees and the agents to be confusing,” Errol Samuelson, Zillow’s chief industry development officer, said in a video circulated Wednesday to brokerages. “This new approach will streamline the transaction.”
Samuelson made a point to stress that Zillow is not looking to usurp the role of local agents, who have long feared the Seattle-based giant would push them out of transactions. “Let me address one thing right off the bat. We are not recruiting agents from other brokerages,” Samuelson said. Instead, Zillow will ask current employees who work on Zillow Offers to get licensed.
Zillow, which historically made money by selling ads through its Premier Agent program, has bet big on iBuying since 2018, when CEO Rich Barton called instant home-buying a “moon shot” opportunity. In general, iBuyers like Zillow, Opendoor and others make cash offers for homes for a fee, and aim to resell at a profit after making modest repairs.
A Zillow spokesperson said the company’s agents will only represent it on iBuying deals and will not be allowed to moonlight as agents in the traditional sense. “We are only bringing in-house the back-end work to represent ourselves whenever we directly buy or sell a home,” spokesman Viet Shelton said. “In no way are we signing clients traditionally.”
According to Shelton, Zillow will continue to refer sellers to local broker partners (i.e., Premier Agents) if they choose to sell their home traditionally. Zillow will also refer clients to local agents if they need help finding and buying their next home.
Zillow first got licensed as a brokerage in Arizona in 2018, under pressure from local regulators after it launched its iBuying program. It has steadily accumulated licenses in other states, including New York earlier this year. (Zillow does not operate its iBuying business in New York.)
Zillow has denied plans to operate a traditional brokerage. Rather, it says some of its offerings require licensing, such as its “Flex” program, which gives agents qualified buyer leads. Agents pay no upfront costs but get a “success fee” akin to a referral fee if they close a deal.
Still, the lines between traditional brokerage and iBuying are getting blurry.
Brokerage giants Realogy and Keller Williams offer online home-buying options. And in June, Offerpad launched a real estate solutions division that allows clients to list their homes with in-house agents and use a concierge service to get their property ready to list.
Last month, SoftBank-backed Opendoor quietly began recruiting agents. The company, which plans to go public via a $4.8 billion SPAC deal, said agents would work on a new “Home Reserve” platform that lets sellers list their home with Opendoor while purchasing their next home with an all-cash offer. To start, Opendoor has sought agents in Phoenix, Inman reported.
Zillow said its brokerage operation is different from its rivals since agents will only work on Zillow Offers.
Last year, iBuying accounted for 0.5 percent of the U.S. housing market, or $8 billion in sales, according to industry analyst Mike DelPrete. Opendoor, the market leader, generated $4.7 billion in revenue. Zillow, in the No. 2 spot, generated $1.365 billion in iBuying revenue in 2019, up from $52.4 million in 2018. But it still lost $300 million on iBuying.