Much has been made in recent weeks of Zillow’s house-flipping arm going belly up. As a go-to website for millions of families looking for their next home, it’s been troubling to see a beloved company kicked while they are down. Even a November 18th Wall Street Journal column by Laura Forman(1) tried to blacklist Zillow including the company in a “…Beware of Tech-Posers” warning to would-be stockholders about overvaluing “tech” business models that rely on physical products.
While the article had a fair point in general, its insight was irrelevant to the actual problem behind Zillow Offers. For reference, the author tried to lump the Zillow Offers’ downfall in the same boat as other failed projects once billed as technology innovations. Yet Zillow’s core offerings – yes, technology - are still extremely profitable and the site continues to offer tremendous value to consumers, real estate professionals as well as the amateur real estate investor.
It’s this kind of ‘win-win-win’s which motivates us at Doorward Inc. and therefore we feel compelled to defend their good name. To do so, we'll also be forced to point to their actual and albeit costly mistakes, but this is inevitable when examining the facts.
The reality is, there is nothing wrong with diversifying revenue streams and Zillow did many things right, and we would like to think that over a longer period of time, either their technique would have proven workable or they could have refined their methods because we all know statistical moneyballing can be effective! And let us be the last to deny the human capacity for problem solving.
Perhaps the actual Achilles’ heel of Zillow Offers was the lack of “boots on the ground” - localized knowledge which helps make a truly informed decision on the value of a home. The world has certainly become a smaller place with real estate investors no longer building portfolios just in their own backyard. Circumstances require - and innovations facilitate - that if you want to be successful, you have to buy where properties are cashflowing, even if that housing market is halfway across the country.
This is where the value of networking in real estate comes into play. People don’t make bad decisions: People make reasonable decisions with bad information. Thus, the power of Doorward’s Social Real Estate community rests not on our technology per se, but on the ability to connect like-minded players so that they can do what they do best. Much of that networking and crowdsourcing of information happens in real estate investment clubs, where those less familiar with the market, a neighborhood or real estate in general can go to learn, be trained and mentored, and be helped along the unfamiliar paths.
People who are successful in this business understand that real estate is all about relationships. There is a reason why real estate is the most referral driven industry that exists. It’s players understand that they are “in common” more than they are “in competition”.
Social Real Estate allows for the kind of collaboration which would have made Zillow successful. Instead of their army of nerds behind computer screens, mom & pop investors learn more about the current scene in a fraction of the time just by talking to each other. Instead of letting supply chain issues and labor problems derail a renovation, your real American entrepreneurs are leveraging relationships to share information about contractors whose partnership is needed to make a rehab/flip profitable.
At Doorward Inc. we believe in the power of small business and recognize that locus of control is critical in this industry. It’s a shame that the analysts hired to price-check the offers were so disregarded. They were doing their job and their reports were allegedly “routinely overruled” for the sake of meeting home-buying quotas. Even their efforts to vocalize their concerns were reportedly largely ignored – until it was too late and Zillow shut the whole project down. And perhaps even more than trusting their own algorithm – or “drinking their own kool aid” as it's been called these days – this was Zillow’s actual kryptonite: they didn’t trust their own employees.
Examining the reality behind the recent events at Zillow and what it means for real estate going forward
This article was written, edited and published by members or collaborators of the Doorward Team. Doorward Inc. maintains a positive outlook on the inherent dignity of each: their singular ability to reason and create, to choose and likewise be responsible for their decisions. We defend their best intentions and affirm each person’s freedom to express their own thoughts and opinions and experiences, and to engage in civil discussion regarding them.
This article is meant to be thought-provoking, and is not intended to be specific direction for the topic of this post. Please do your own research and consult the appropriate people for guidance before making a decision related to the topic of this post.
