Julie Nelson’s desk is a mess of potential client folders. After working as a real estate agent for 20+ years in Austin, much of her time now is spent coaching the gamut of real estate agents, from the green to the seasoned, under The Nelson Project, her coaching company. When we speak, Nelson is in the throes of advising an agent whose buyer is not understanding the sheer wall of competition against them in Austin. “We become these armchair economists. As we navigate a market like Austin right now, people have to understand that inventory is critically low,” says Nelson.
Austin, Texas is deep in the growing pains of becoming the next unicorn real estate market. In 2020, U-Haul conducted a study of state migration to find precisely where folks are moving across the United States in the midst of the pandemic. Texas took 2nd place. Zillow has also forecasted Austin to become the country’s leading real estate market in 2021 in what is classified as a Sunbelt Surge; dollars go farther across the south than coastal cities like San Francisco and New York City. A whopping 84% of surveyed economists, investment strategists, and real estate experts predicted that Austin’s real estate scene will outperform other metros across the country throughout 2021.
Wendi Slaton Anderson, the founding broker of Roots Residential Group in Austin, can attest to the flood of new residents. “I have clients from Seattle, New York, Southampton, Chicago, Atlanta, the Bay Area, Los Angeles. This market has been strong, but now it’s on fire.” According to Norada Real Estate Investments, Austin’s housing inventory has fallen to a 1.6 month lead time. From 2010 to 2019, home sales in Austin have risen 84%. The brutality of a housing shortage and intense competition in Austin has been felt by Anderson’s clients as well. “A balanced market has six months of inventory, and we have [just over] a month. We’re seeing homes go on the market with 96 offers [and I’ve seen] cash buyers offering a quarter of a million dollars over asking and not winning.”
The demand for housing in Austin over the past decade has led it to becoming one of the 25 cities that debuted Zillow Offers in 2018. Zillow Offers focuses particularly on real estate sellers who seek to simplify the process. Homeowners can log onto Zillow, enter vital information about their home, and receive an initial market value estimate within 48 hours. The seller is then connected to a member of the Zillow Advisors Team, who is available from 8AM-5PM local time. Zillow then sends an evaluator to the home to inspect the property and may revise the offer accordingly. Within 48 additional hours, a seller receives a cash offer on the value of their home and can close in as little as two weeks to as long as 90 days. “We launched Zillow Offers with this vision of making it easier to move into the next chapter of your life,” says Seattle-based Zillow spokesperson Jordyn Lee.
In conjunction with Zillow Offers, Zillow Rewards is an incentive program that has also debuted in Austin for Zillow Offers customers who bundle selling their existing home, buying a new one from Zillow’s inventory, and utilizing Zillow Home Loans for mortgaging services on the new property. The bundling of services earns users a rebate of 1.5-2%, $1,500 in closing credits, and a free local move from BellHop. For new homebuyers looking for their next property after selling their home to Zillow, the caveat is that they must work with a partnering agent broker in the territory who works as Zillow’s representative.
Substantial perks, especially when a flood of potential buyers are interested in viewing a home, included with Zillow Offers is that sellers do not have to publicly show their homes. They also do not have to worry about cosmetic repairs; if Zillow is sold the property in question, they will fix it up before selling the home. Plus, timing a transfer of a home is difficult and the 14-90 day window for closing that Zillow provides is vital to existing users. Many buyers can become stuck in the purgatory of living in a temporary rental, moving back in with parents, or paying two mortgages while deals close out completely. Part of Zillow’s aim for simplification in the home selling process is reflective of the past decade of tech businesses built on convenience. “[There has been] a lot of evolving; you call an Uber and get food delivered [to your door with an app]. [Zillow’s] vision is to be able to press a button, sell your home, and move seamlessly,” says Lee.
On the buying side for a Zillow Rewards customer, homebuyers who bundle services to purchase a home owned by Zillow can tour empty properties, which is valuable in the midst of a pandemic. All 25 of Zillow’s markets utilize self-touring technology so prospective buyers can unlock a home via app and tour spaces on their own time. According to Lee, Zillow has been pleased with the current growth rates of both Zillow Offers and Zillow Rewards. Across all 25 national markets, in 2020 Zillow purchased 4,100+ homes and sold just over 5,330 homes for a revenue of $1.7 billion dollars. Q4 of 2020 alone boasted the purchase of 1,700+ homes and 923 home sales for a revenue of 304 million dollars.
It can be argued that the bull market of Austin real estate and the rate of migration due to work flexibility would put Zillow in a particularly powerful position due to premiums on convenience. However, one missing key factor known to working realtors in a flaming market are very human demands of personality management. Nelson has a smörgåsbord of stories about trying to explain delicate housing realities to clients. One client, after closing on their first home in Austin at about 20% over asking, will have the most expensive house of that size in the neighborhood. Nelson’s worry is that the client may be in over their head. “I can’t make that decision for them. There is a lot of communication between agents and lenders, and in that case, the lender specifically called the listing agent to figure out how to discuss this situation with the buyer. No automated process will be able to do that — we have to pull every trick out of the bag for every buyer to get them as competitive [as possible]. This is what happened in the Bay Area before.”
To extrapolate on the human element of real estate transactions, Nelson has a primarily referral based business and a third to half of her clientele identifies as LGBTQ+. “A lot of clients seek me out because they want someone they can relate to that can understand some of the nuance that comes along with buying a home [as an LGBTQ+ individual].” Nelson believes that the human element of real estate — of having a person who may identify as you identify — is a core foundation to making one of the greatest fiscal investments of your life.
Anderson, similarly to Nelson, works 100% off of referrals with a particularly diverse clientele from rock stars to investment bankers. Those same clients have turned around over the years to upgrade their homes. “My very first client has probably bought 6-10 houses and has referred me...I can’t even count the number of clients,” says Anderson. Anderson’s roster of clients and referrals have been developed over the past 20 years by her own dedication to go above and beyond. “What I’m managing is paperwork, contracts, developing relationships with quality lenders, title companies, inspectors, knowing where to get things like flood plain information, knowing how to read a survey. Every property is different, plus a market like Austin is changing weekly. What was a great strategy two weeks ago won’t work now.” To that point, it is hard to know exactly how much communication Zillow can consistently offer both buyers and sellers for these programs to get them as comfortable as they would be with a traditional agent. Additionally, in a market that is on fire, innovation has to occur on the ground constantly, and that starts with the networks built by realtors.
For Anderson, the value of a realtor’s expertise is displayed by time management. “Answering questions in real time and managing fears and insecurities and setting realistic expectations [is key]. [We] celebrate when we find the right property and share in the disappointment [when things fall through]. It’s not a computer program that can do that.” Anderson goes so far to say that not a single client of hers would actively prefer to work with a technology company to sell their homes. “When it comes to making the biggest life investment, trusting an algorithm or website is not comforting. I’m pretty sure they’re not going to reach out to clients on their birthday and show up on their doorstep with cake.”
Spurts of innovation and the threat they pose is not new for realtors. “ZipRealty, Redfin, the internet in general, Zillow, Amazon — there is always something that is threatening my livelihood, but I know the value I add to my clients and I don’t see in the next 10-20 years a tech company pushing out the human element that is essential in a real estate transaction. 10k [in rebates] wouldn’t make my clients go and take a risk on the 350k or three million dollar investment.,” says Anderson.
While Nelson is a bit more cautious about the automation of real estate, she is also paying very close attention. “[This could] impact my career and other agents who are still building their businesses and entering the industry. There are a lot of unknowns. Everyone is watching what Zillow is doing.”
While Zillow does incorporate local brokers into the home buying portion of real estate transactions, it is early to say what the ramifications will be for local economies built on home buying, selling, and mortgaging. It seems the key ground to lose as Zillow Offers and Rewards rises in prominence would come from lost business to local mortgage lenders and from realtors selling homes that, instead, are sold directly to Zillow.
Perhaps it will take years to really see Zillow Offers and Zillow Rewards overshadow the physical, local networks of realtors and lenders in markets across America. However, the situation at hand in Austin underscores how realtors are the underpinning of the real estate industry. They are the ones tasked with managing the messy, unrelenting mix of human emotion and data to shepherd many Americans into making the greatest financial investment of their lives: their home. The question at hand is whether Zillow can truly manage the human needs of homeowners and buyers. Or, perhaps, the question is not if, but when.