Recent Acquisitions in Home Buying Market Target Advanced Technology

ZipRealty, Realogy Holdings Corp, Bay Area, Pacific Union, Emeryville, Zillow, Trulia, San Francisco, Century 21, Coldwell Banker, Sotheby's International Realty,

By Neil Gonzales

homepage-mobile-342x355July brought some big shake-ups in the residential real estate industry involving two Bay Area companies.

First, New Jersey-based franchiser Realogy Holdings Corp. on July 15 announced its plans to buy technology-oriented brokerage ZipRealty, Inc. in Emeryville for $6.75 per share in an all-cash transaction valued at about $166 million, with the former eyeing the latter’s online tools and other innovations.

Less than two weeks later, another purchase was announced: Seattle-based real estate Web site Zillow Inc. will buy competitor Trulia Inc. in San Francisco for $3.5 billion in stock to form a powerful juggernaut in online house hunting.

While the acquisitions speak to increased industry efforts to create or improve technology for homebuyers and sellers, local agents say, they will not diminish or eliminate the role of Realtors.

“No one has figured out how to have a delightful experience [searching for a home] just on the Internet,” said Jim Walberg, an agent with San Francisco-based real estate firm Pacific Union. “The boots on the ground is still where it’s at. Zillow, Trulia or any of the consumer sites has never seen the kitchen inside of a home. Realtors are out there every day in the trenches, serving consumers.”

David Tonna, president of the Silicon Valley Association of Realtors, also is not worried that the Zillow-Trulia merger will hurt the local brokerage industry. “Zillow is not a brokerage,” he said. “You can’t go there to purchase a home.”

More and more people may be turning to the Internet for home listings and other data to start their house search, but Tonna said real estate agents are still “needed to get inside the house and help clients understand such concerns as comparables and disclosures.”

Even as online house-hunting services have grown, the employment of real estate brokers and sales agents is projected to increase in the coming years. According to the federal Bureau of Labor Statistics, that line of work will grow 11 percent from the 422,000 brokers and agents in 2012 to 468,600 in 2022.

The job growth will continue “as the real estate market improves,” the bureau reported. “Population growth and mobility also will continue to stimulate the need for new brokers and agents. In addition to first-time homebuyers, people will need brokers and agents when looking for a larger home, relocating for a new job and other reasons.”

As for any local market impact of the ZipRealty sale, Walberg called it a “non-event.” That’s because ZipRealty just has a small market share already compared to its competitors such as Pacific Union, he said.

Realogy went after ZipRealty because “they want to snag the technology” not so much the local market, he added.

Realogy CEO Richard Smith said as much. Realogy seeks to “capitalize on the innovative technology platform that ZipRealty has honed over more than a decade of development,” Smith said in a news release. “We intend to fully leverage ZipRealty’s comprehensive suite of world-class technology tools across our business, enabling both our franchise brands and our company-owned operations to be more productive [and] efficient and better serve their customers.”

ZipRealty’s programs involving property-data research, marketing and other facets in real estate will further Realogy’s “efforts to drive Web- and mobile-based lead generation and client conversion,” Smith said. “This will also serve to augment the investments we are already making to improve the experience of buying and selling a home for consumers, sales associates and brokers.”

ZipRealty’s tech capabilities have overcome the fact that the company has accumulated a deficit of nearly $137 million. “ZipRealty struggled with profitability because the discount model upon which it was founded never became a mass-market phenomenon,” said Brian Boero, co-founder of 1000watt Consulting, a digital marketing agency focused on the real estate industry. “The company struggled to find its way as a brokerage but did manage to build great technology.”

But ZipRealty’s profit struggle is more of an industry exception. “Yes, there are many profitable real estate brokerages, particularly in markets with high average sale prices,” Boero said. “Brokerages that offer a range of home services such as insurance, property management and mortgage origination in addition to their sales services tend to do better than those that do not.”

Realogy completed the deal with ZipRealty this month. Other Realogy brands and business units include Century 21, Coldwell Banker, Sotheby’s International Realty and NRT LLC. The Zillow-Trulia deal is expected to close next year.

West Coast Commercial Real Estate News