OK, this post will probably be of interest only to agents, and maybe I'll get feedback that I'm way off base, but I've got to vent. AND I am really curious as to the opinion of other real estate professionals, and consumers too, for that matter.
Since 2010, I have been paying for Zillow's "Premier Agent" program. What it means is I pay for the privilege of having my mug pop up on the right hand side of the screen when a consumer is looking at a property in the particular zip code I "own." I pay for X% of ____ zip code, which means my contact information will be included one of the three agents in that list X% of the time.
When I first purchased the Premier Agent program in 2010, it was a big deal for me, because the market was still slow and money, especially money spent on anything not absolutely required, was extremely tight. But I know how many consumers start their home search on the Internet - over 85%, last statistics I heard - so I bit the bullet and paid some amount for 25% of 23220. I think it was about $115/month, but I got a decent discount if I paid for a full year. I told myself if I got ONE sale out of it, the Premiere Agent program would pay for itself.
The program has been extremely successful for me. It has recently become MORE successful, because Zillow has added a Customer Review section, which allows clients to review you and hopefully say very nice things about you. Presumably a consumer will chose to contact the agent with the highest rating to get additional information about the listing. The benefit to the Premiere Agent: You get the opportunity to capture that customer and hopefully convert them into a buyer client. Because I have had success with Zillow's program, because it has been a good investment with positive return, I have purchased more coverage for the zip codes where I practice. So I have coverage in 23220 (Area 10 - City), 23221 (Museum District, Near West End), 23223 (Church Hill, Montrose), and 23227 (Northside, mainly Bellevue).
Here's the problem, in my opinion: ANY AGENT can purchase ANY Zip Code. So the agent the consumer sees in the right hand column, the agent the consumer contacts, might have absolutely zero experience in the geographic area where the property of interest is. So what does that do for Zillow? As agents figure out the power of Zillow's program to generate buyer leads, agents buy profitable zip codes. Demand for profitable zip codes - areas where the real estate is expensive - increases. The PRICE of those zip codes increases exponentially.
I just got a call from my Zillow representative letting me know my 50% share of 23220 and 50% share of 23227 is "out of contract," meaning I am paying on month-to-month basis my "legacy pricing rate," which was $137/month. Because of the "high demand" for this zip code and the LENGTHY waiting list of agents frothing at the mouth to buy it, my monthly payment will now be $576/month. And, oh yes, by the way, we will no longer do one year contracts, only six (6) month contracts. So of course they can jack up the rate yet again in six (6) months.
Needless to say, I'm p*ssed. I've been a good customer, was one of the first to buy into the program when it was brand new, and I feel like I should be able to keep my legacy pricing, or at least get some sort of more graduated increase. It's like now that the investment is FINALLY paying off, they increase the price 400%. I'm stamping my foot and hollerin' "It's not FAIR!" [To which my Dad would reply, "Who ever told you life was fair?" But I digress.]
So I'm getting screwed, but you probably don't care about that. But here's how this program screws consumers, which you should care about. Agents with no experience in an area, but with deep pockets, will get in line for zip codes with the priciest real estate. In Richmond, Virginia, 23220 is one of those zip codes, because of the Historic Fan District. Rather than the about $170,000 median home price for a home in the Greater Richmond area, the median price for a home in the Fan is in the neighborhood of $625,000. [NOTE: That figure comes from an article in Style Weekly about the battle over the Fan House's downstairs bar]. It's a lot easier to make a living selling $600,000+ homes than it is selling $170,000+ homes. Agents line up for that zip code, increasing the demand, increasing the price. Very good for Zillow.
But how about the consumer who clicks on the agent who pops up 100% of the time when that consumer is reviewing Fan listings? Isn't it reasonable for that guy or gal potential buyer to expect the agent is an expert in that area in which the property of interest is located? What if they are a suburban agent in Chesterfield County who doesn't know the first thing about historic property? Or better yet, what if they are an agent in WILLIAMSBURG, that doesn't even belong to the local MLS? Both things have happened with me and my listings, and are going to happen more and more, as agents catch on to the power of the Premier Agent program.
So, what's the ultimate effect?
- Zillow gets richer;
- Agents pay more for access to zip codes and those buyer leads;
- Agents without any experience in a particular area, but with deep pockets, can and will buy the priciest zip codes; and
- Consumers end up with agents that have little to no experience in a particular area.
[NOTE: Consumers should be doing their own due diligence on the agents they choose to work with, particularly when looking at an area or property type that requires specialized knowledge, like historic property, resort property, farms, to name a few. But I am constantly surprised at how little research people do on the agents they choose. Consumers should be asking how many listings in the area that agent has had, how many sales, how long they have worked there, etc. But that is a topic for another day].
What do I think is the solution to the problem? Well, it's not one Zillow will adopt, I will tell you that. I think there should be some nexxus between the agent purchasing a zip code and the zip code. What do I mean by that? The agent should have sold a property there, listed a property there, have his or her office there, live there...I am sure there are other means to establish nexxus. My poor account rep, Gus, who has graciously and patiently listened to me vent about how much Zillow SUCKS, said this would be "way too difficult" for Zillow to do. Horse hockey. They are running so many algorhithms with all the Zillow data they collect now, I am sure the agent zip code nexxus would be a piece o'cake.
What would the result be, in my opinion?
- Consumers would be better served by Zillow, which already has a host of data accuracy issues, by getting appropriately experienced agents;
- The artificially high demand for pricey zip codes would drop; and
- Agents in an area wouldn't have to pay such exorbitant pricing for the privilege of getting buyer leads off what was originally our own d*mn data [NOTE: Again, topic for another day].
Yes, I know this is somewhat self-serving. I want my zip codes, and I don't want to have to pay $576/month to have them! But this goes to a more core issue for me. I am continually frustrated with agents practicing in areas they have no d*mn business practicing. I know what I know, and I know what I don't. In the 6+ years I have been in real estate I have learned the hard way to stick to my knitting, to practice in the areas where I am knowledgeable and value-added, and to refer any other business outside of my comfort zone. There are not many people, except possibly my broker and some other of his contemporaries, who can really truly claim to have expertise in ALL of the Greater Richmond metropolitan area these days. But agents will tell you all day long they can sell anywhere.
Zillow is selling its data to the highest bidder, without regard to any link between that zip code, that agent and that agent's experience. I'm sure my complaints aren't going to change that. Free market, right? But to sell a Richmond zip code to an agent that is not even in the same MLS is, I think, outrageous. If Zillow really is a product for the consumer, don't they want the consumer to get the best possible service from a true local expert?
All this and $0.25 still won't get you a cup of coffee.
Even so you posted this one year ago, this "problem" still is there and the competition for zip codes is just increasing.
It is a fact that this program was really successful and Zillow build the story around this and say "hey, you can achieve the same and even better results" but they dont say that prices for zip codes were increasing over time.
I agree it is not really good for consumers if they have to deal with agents who dont know that area at all. The best advice I could give is to increase your local reputation and get lots of good customer reviews on different sites, not just zillow.
I guess after some bad experiences customers will figure out that those agents on zillow are not the market experts they claim to be and they will keep on searching for an agent elsewhere. This will hurt Zillow's reputation as long they dont check the agents background and just sell any zip code to the highest bidder...
Posted by: Bastian | January 14, 2013 at 11:44 AM