Why Zillow’s ‘Instant Offers’ Pilot Program Doesn’t Matter

Zillow is testing a new program in a couple of markets.  They have a pool of investors who will generate an instant offer on your house, picking it up on the cheap without the time, hassel or expenses usually associated with an ordinary real estate transaction.

There’s nothing new about this. For more than a decade, investor groups have created marketing campaigns to help them identify home owners who will take significantly less for their properties to have a swift and hassel free transaction.  And there are people for whom such an offer has great appeal.

I think about my good friend who, at age 80, wanted to divest himself of a rental condo that was a mess.  He considered the value, and was about to list (with a Help-U-Sell broker!), when an investor group contacted him out of the blue.  They gave him about 80% of fair market value.  He took the offer because he wouldn’t have to clean the place, do extensive repairs, sweat out inspections and appraisals or pay many of the normal costs associated with a sale.  Yes, he lost money . . . or rather he exchanged some money for convenience and quickness.  For him, it made sense.

As the real estate industry continues to scramble and ‘innovate’ to re-establish an identity with consumers, some recent entries to the business have adoped a similar approach.  Open Door, now in Phoenix and a few other markets, is buying houses in much the same way.  They are marketing the program as a new approach to residential real estate, one that relieves many of the ‘pressure points’ that weigh so heavily on home sellers. (Translation:  they are buying low, paying cash, fixing and flipping).

The first time I encountered this kind of program was back in the 1970s, when ERA Real Estate built their whole marketing program around the notion, ‘If we don’t sell your house, we’ll buy it!’  It sounded pretty good.  But after a few years it became very obvious that they weren’t buying many (or any) houses!  The terms of ‘we’ll buy it’ included a sales price based on 70 – 80 % of value, and few sellers were willing to take that kind of hit!

The Zillow program – if it survives the pilot, which it should – will appeal to some home sellers;  but they are the same home sellers who are by-passing brokers to take a quick fix already.  It is competition for HomeVestors (the ‘We Buy Ugly Houses’ guys) and Open Door more than competition for us.

Listen:  we have the best program in the business for home sellers interested in making a move with minimum inconvenience while maximizing their hard earned equity.  While  40+ years old, it still looks wildly innovative compared to current alternatives.  Don’t get distracted!  Remember who you are:  you are in the Equity Preservation business!*  And nobody does it better than you!

*Everyone else is in the Equity Consumption business!  They are into taking as big a bite out of the seller’s equity as possible.  The ‘We’ll buy your house’ people are just taking an even bigger bite!

Who Is Your Customer?

I spent almost 20 years working with Century 21 Real Estate.  I was a salesperson, a broker, owned offices, sold them and then spent a dozen years working for the Franchisor, primarily developing training.

Working in the Century 21 Ivory Tower – International Headquarters, where the rubber meets the clouds – I heard the Executives who ‘ran’ the company say (on many occasions), ‘We’re not in the real estate business;  we’re in the franchising business.’

Being a real estate guy, this really bugged me.  I believed that my job was to help my broker members find more customers and sell as much real estate as possible. But that was an afterthought to the company brass. To them, the Century 21 Broker was the customer – and they wanted to get as many of THEM as possible.  AND they wanted to find as many ways to pull revenue from their existing franchisee base as they could.

It was the ultimate disconnect.  And that attitude of ‘an outlet on every corner,’ and ‘nickle and dime ’em to death’ is how that brand came to mean absolutely nothing in the modern real estate world. Think about it:  what does the brand Century 21 stand for? See, I toldja so:  the powerful identity they crafted 40 years ago is gone.

I’ve been thinking about this a lot lately – but not about Century 21.  I’ve been thinking about Help-U-Sell Real Estate and how subtly but completely different we are.  At franchise headquarters and in the minds of everyone who works for the company, there is no doubt who our customer is.  It is the same customer our franchise brokers have: the buyers and sellers of real estate.

We see the franchisee/franchisor relationship as a partnership.  We are working together to realize a goal we have in common:  to work with ever increasing numbers of buyers and sellers and to grow our presence and marketshare year after year.

At Century 21, questions about what the brokers were getting for all the money they paid the franchisor arose at every meeting. Brokers who entered the system full of hope quickly soured, often realizing they were paying the franchisor more than they were taking home themselves. The relationship became adversarial at its core:  us vs. them.

I’ve been hanging out with Help-U-Sell for 14 years now and in our latest incarnation – the one that began in 2009 – I have rarely heard any of that kind of talk. Because we view our brokers as partners (with corporate as the supporting cast), because we have the same bulls-eye, because we are all real estate people, there is a positive sense of participation and unity in the group.

We don’t look for ways to extract more revenue from our franchisees.  Instead we look for ways to help them do more business.  We don’t sit in a vacuum and dictate how things will be.  We ask our people in the street how they should be and how they could be better and then we go to work together to move in that direction. It is a refreshing approach!

And if you can’t tell it:  I’m proud as punch to be part of this company.  I love who we are, how we operate, what we stand for and how we collaborate.  We are on a mission to not only sell more real estate, but also to change the way real estate is sold; and there ain’t nothin’ better than that!

A Good Chuckle

Beverly Sonnier, a Help-U-Sell Broker in Tucson, AZ, forwarded me this email yesterday:

smartagents

(Note:  this is a screen capture of the message so the links don’t work.)

I think this is the funniest thing I’ve seen in awhile! He’s talking about ‘Discount’ brokers, but he means Help-U-Sell (even though we are NOT a discount broker)*.

But he’s saying the only way to compete with us is to go somewhere where we aren’t! The only way to beat us is to go somewhere else!

That’s funny enough.  But then he says, about his ‘Niche’ sellers, ‘These sellers pay a fair commission – day in and day out.’

There is nothing fair about percentage based commissions.  6% of your home’s value is obscene, sure, but even 2% would be unfair! What does a percentage of your home’s value have to do with what it takes to get it sold?  (Absolutely Nothing!) And, if your real estate broker is charging a percentage, that mean the person with the less expensive home is going to pay LESS than you for the exact same service! There’s NOTHING fair about that!

Listen:  the ordinary real estate world runs on a business model that hasn’t changed in 70 years.  It’s old and stale and consumers are rapidly figuring that out.  One thing this 21st Century has shown us is that consumers will quickly jump to anything they perceive to be faster, better, more modern or more logical.  Consider the rise of Amazon and the decline of Macys, J C Penney and Sears.  Faster, better, more modern, more logical:  that pretty well describes Help-U-Sell Real Estate, except that you can also add in Less Expensive!

*A discounter finds ways to cut the expense associated with providing goods or services.  They might use less expensive material or provide fewer customer service personnel.  In real estate, a discounter would cut something – and it would probably be marketing and service.  That’s not Help-U-Sell.  We charge less because our business model is different:  it is modern and efficient.  Our sellers get all of the marketing and personal service ordinary brokers deliver and actually more . . . they just pay less. 

Must Read If You Are Marketing By Carrier Route

We all got so granular over the past few years!  And that’s a good thing!

Rather than shotgunning our message all over God’s Green Earth (and paying a hefty toll for the privilege), we started looking at our marketplaces through a magnifying glass.  Instead of marketing by Zip Code, we started breaking down the Zips by Carrier Route.

Most Help-U-Sell offices refined their marketing targets down to 5 to 10 Carrier Routes, depending on turnover rate and budget (That usually works out to 3,000 to 8,000 households).   The problem is, since every Carrier Route has its own turnover rate, it became difficult to know what the OVERALL turnover rate was in your complete target.  Most Brokers just kinda guessed.

Does that make any sense?  You just spent all this time and energy carefully tearing your marketplace apart so that you could construct a productive target.  Instead of doing what most Brokers do (which is to guess or make the decision based on hearsay or gut), you based the whole process on FACTS.  Cold hard FACTS.  And now, you’re going to guess at the turnover rate within your target?  I think NOT!

So, here’s what you do:

tor2-1

Add up all of the households in all of your Carrier Routs, then add all of the houses that sold in the past 12 months in all of the Carrier Routes . . . . Then just divide Homes Sold (the small number) by Households (the large number).

Those of you in a Coaching Group can use this AMAZING number in the Market Analysis tab of your 12 Month Goal Setting Worksheet, here:

torate22b

I sincerely hope this keeps you guys from guessing about your business!  And maybe the whole process will intrigue some into investigating the Coaching Group opportunity.  I hope so.  We’ve got openings.