Zillow, the place most of you will end up finding your next home, told Wall Street today its 2018 revenue of $1.33 billion was up 24% over 2017, and also told us what the future of buying and selling our home looks like.
Here’s the quick history:
Zillow built its business by getting most of us—154 million per month in 4Q2018 to be exact—to hang out on Zillow sites/apps looking at properties, then selling the ability to connect with us to real estate agents and lenders. Wall Street loved this for years and Zillow investors have done well.
Then within the last year, Zillow realized that, since it owned the place you prefer to start your real estate journey, it could better serve you by letting you sell your home directly to them, then find, buy, and finance your new home via Zillow as well.
So last April they started buying homes from you sellers out there to become a key leader of the “instant offer” home trade-in model we’ve been telling you about, and last October they bought a mortgage company to provide financing to those of you buying a new home from Zillow’s inventory they’re accumulating through their instant offer program.
Investors haven’t been as happy about this, but they’re gonna have to get with the program. This is the future of real estate.
That brings us to today’s huge Zillow news:
– Zillow’s original co-founder Rich Barton is returning as CEO, and existing CEO Spencer Rascoff—who took the company from $30 million in revenue to the current $1.33 billion—will join Zillow’s board of directors. Barton is a Big Tech Dude. He founded three web giants you probably use: Expedia, Glassdoor, and of course Zillow. He’s also sat on the Netflix board since 2002. He knows scale, and knows how to buy time with Wall Street to let this one-stop shop consumer vision play out.
On that note, below are a few things Zillow’s New Barton Era said it would do in the coming years.
– Zillow plans to buy 5,000 homes a month within the next 3 to 5 years and thinks that business will make it $20 billion(!) a year in revenue. Barton said today they’re already getting one request every 5 minutes from sellers who want Zillow to make them an instant offer to buy their home.
– In this timeframe, they also want to be making 3000 mortgage loans per month, of which at least 33% will finance the sale of these 5000 homes per month it’ll be buying through their instant offer program. To put this in perspective, if the average loan size is $200,000, Zillow would be doing about $7.2 billion in loans per year, which ranks them as a middle-market mortgage lender.
-Zillow lost money last year because it’s investing in these new businesses. Investors don’t like that, but like I said, they gotta get on the train. Why?
Because a one-stop shop is a huge win for us as consumers.
If you could use one company to buy, sell, and finance your home, doesn’t that sound better?
Why can’t you run the same drill with homes as with cars?
Zillow’s bringing us closer to this reality. In the near future, this is how it’ll go down:
– You’ll go on Zillow and find a house you like.
– Zillow owns the home, so you can deal directly with them to buy it.
– You’ll click on the “get pre-approved” button on the listing for a Zillow mortgage.
– A Zillow agent or algorithm will process your mortgage like a car salesperson processes your auto loan.
– Then bam, you’ll sign docs and have the keys to your home, all while only dealing with one company.
Getting a mortgage is clunky. You have to deal with so much paper and multiple companies to even close the deal, and then with more when your loan gets sold.
If Zillow’s dream comes true, this will go way easier.
On the earnings call today, Barton said you as a homeowner has been “Uber-ized,” meaning you expect complex things to happen with a push of a button on your phone (and it should, duh). Zillow wants to be the company that does that for your next home.
We’ll be going deeper on this shortly, so stay tuned…