
Zillow to Acquire Trulia for $3.5B - julio_iglesias
http://dealbook.nytimes.com/2014/07/28/zillow-to-buy-trulia-for-3-5-billion/
======
IgorPartola
Having bought real estate, I can say that Zillow/Trulia are both a blessing
and a curse. They are great in that you can see what's been listed for a
while, scan a map, and generally put a pretty interface on house searches.
This I imagine is their great advantage. I also found my mortgage company
through Zillow's mortgage rate search.

Their big disadvantage is that their records are not updated as fast as the
conventional MLS. The house I bought recently came on the market 7 days before
I made an offer. It was not on Zillow even by the time we had the contract
signed. The sellers, for whatever reason, put a very reasonable (possibly even
low) price on the house, and I was at the end of the search, having seen
enough locations in the area to know that this was a great value.

Another random personal experience: when I first saw Zillow I remember
thinking "who needs real estate agents if you have all this?" Then I got an
agent to buy my first house. All I have to say is "you do not know, what you
do not know." While I do wish that agents simply took a set fee instead of it
being a (very large) percentage of the purchase price, they provide a hugely
invaluable service. I am not saying it's impossible to buy real estate if you
don't have an agent; but if you can do it, you are probably a real estate
agent.

~~~
rahimnathwani
_they provide a hugely invaluable service_

What is that service? I'm not being snarky; I'm genuinely curious, as the
structure of the industry (and fee level) is significantly different than
where I'm from. I don't get why you need a real estate agent to help you buy.

~~~
chaosphere2112
I'm in the process of buying my first home, and it's been hugely helpful to
have an agent. Services include:

\- Tours of homes; seeing something online and seeing something in person is
an impressive difference. Some houses look amazing online and terrible in
person, or vice versa. Cannot possibly overstate the value of this.

\- Negotiation; he's a professional negotiator, and he has years of experience
negotiating in the exact market that we're buying in.

\- Documentation; there's a RIDICULOUS amount of paperwork to file, and all I
have to do is read/sign it.

\- Inspections; he has handymen and inspectors on file, and knows that they're
trustworthy.

\- Knowledge; he's done this dozens/hundreds of times. He knows about how long
things take, he has reasonable estimates of how much things will cost, and he
has the patience to answer all of my questions.

~~~
caw
I'm also in the process of buying a home for the first time, and did some
search on Trulia/Zillow. It was OK, but the data gets really stale. One home
was sold already before it was taken down. I did find out that Houston has a
really nice site, har.com that lets you do basically everything Trulia &
Zillow does. Realtors have other interface(s) into the same data, which lets
them do different things like N sided polygons instead of just squares for map
searches.

Tours vs images is definitely an issue. Some people are just bad
photographers, some only have 6 images (Houston MLS requires 6 images for a
posting). Some are good photographers, that make things look bigger than in
person.

Experience is hugely variable though. I called 2 agent offices, and got stuck
with their most inexperienced Buyer's Agent. The more experienced people are
doing sales of homes or commercial, and getting a cut of the commissions of
the people under them. Some Googling led me to roughly a 60/40 split between
agent & office, along with the agent paying a desk fee (~$50/monthly). Since
the principal is still getting paid, you can involve them if needed for second
opinions or more nuanced explanations. Agents are getting roughly 3% of the
sales price.

Still read all your documents. I've caught things that slipped past my
realtor, and also brought up questions for her to answer.

Inspections are a mixed bag. They have a preferred list, and should also
provide you a legal document stating their incentives for any recommended
providers (including home warranty companies). I ended up going with one of my
realtor's preferred inspectors, but only after calling all 5 on their list,
and several more listed on Yelp.

Knowledge goes back to experience. My agent was basically bowled over by 2 of
the new home builders in the area. It was so bad I considered buying the
Realtor's Residential Construction Certification program (1 day course, ~$300,
they'll sell to anyone) and going through it myself if I went with new
construction.

Another point about knowledge is that even with experience, you can come up
with stuff they don't know. Neither my agent or the broker (my agent's boss)
had worked with anyone that negotiated their lender origination fees. I got
$500 off one lender and $1000 off another.

~~~
rahimnathwani
_Agents are getting roughly 3% of the sales price._

In the US, agents get roughly 6% of the sales price. The sellers's agent gets
3%, and the buyer's agent gets 3%.

In the UK, agents get roughly 1.6% of the sales price. The seller's agent gets
1%-2.5%, and there is no buyer's agent. There are other costs (survey and
lawyer fees) but these are not large either, and aren't related to the price
of the property.

~~~
wpietri
Regarding the US, I think the typical deal is that the seller's agent and
broker each get 1.5%, and the same for the buyer's agent. Some agents are
their own brokers, but I believe that's rare.

~~~
rahimnathwani
This split is about how the realtor splits their commission with their
employer and/or the umbrella company which provides marketing, access to MLS
etc., right?

~~~
wpietri
Yes. The broker is the one who is "really" doing the transaction. A broker can
handle a deal on their own; an agent must use a broker as well. Wikipedia's
not-entirely-clear description is here:
[http://en.wikipedia.org/wiki/Real_estate_broker#The_differen...](http://en.wikipedia.org/wiki/Real_estate_broker#The_difference_between_salespersons_and_brokers)

------
chatmasta
I interned for Redfin last summer. This is a really interesting space, and
most people don't realize that Zillow/Trulia are operating drastically
different businesses from Redfin.

Some background: The US real estate industry is broken up into regions (e.g.
SF bay area, Orange County, Lake Tahoe, etc.). In order for a brokerage [1] to
operate in a region, it needs to employ agents specifically licensed in that
region, and have a real office there. Importantly, each region also has its
own data feed of listings, called an MLS feed [2]. Amongst real estate agents,
the MLS feed in each region is considered the primary source of real estate
listings. If a house is not in the MLS, it's not for sale. BUT, only
brokerages have access to MLS feeds.

There is no standard for MLS software. It's truly terrible. No joke, in some
regions, the MLS service -- responsible for all real estate listings in that
region -- is an archaic Windows program running on a desktop in some guy's
Lake Tahoe cabin. Generally, MLS feeds are _similar_ in structure, but there
is no semblance of standardization, API, or developer-friendly solution for
accessing it. Every region has its own MLS feed with its own structure, access
restrictions, weird rules, etc. It's a nightmare to develop against.

Zillow and Trulia set out to solve this problem. They are listing aggregators,
essentially filling the same role as MLS software. But because Zillow and
Trulia are not brokerages, they cannot access the MLS feeds. So they have to
get the data on their own. They depend on real estate agents manually
inputting their listings into the Zillow/Trulia platforms. Nowadays, most
agents _do_ input this data, but that was not always the case, and IIRC
Zillow/Trulia still only have something like 80% coverage compared to MLS
feeds.

So Zillow and Trulia are simple listing services. They are basically
advertising platforms for real estate agents. Their revenue model depends on
agent referrals, paid listings, etc. They have no direct role in selling a
house.

REDFIN IS A BROKERAGE. Redfin actually employs real estate agents who will
help you buy a house. And instead of earning commission proportional to sale
price (a huge moral hazard -- see: Freakonomics), they earn commission based
on customer satisfaction. So Redfin agents are inherently motivated to work in
the customer's best interest, instead of their own, which is getting the price
as high as possible.

Because Redfin is a brokerage, it is entirely different from Zillow and
Trulia. This is the reason that you only see Redfin in "some" areas (although
they have coverage in most major metropolitan areas at this point), while
Trulia/Zillow are nation-wide. When Redfin expands to a new area, it needs to
establish an office, hire and train agents, file paperwork, etc. This takes
time, but often when Redfin gets to a new area, there are already thousands of
customers who have been waiting for them to launch there.

Also, because Redfin is a brokerage, it has access to MLS feeds. So Redfin
gets its data directly from the source, instead of depending on real estate
agents to enter their listings directly into its platform. Because of this,
Redfin has 100% coverage in all the regions it serves, compared to ~80% (IIRC)
of Trulia/Zillow.

So now it looks like the market will come down to Redfin vs. Trulia/Zillow.
I'm curious to see how this plays out. On one hand, Redfin has a far more
defensible model -- they have an office in every region, and actually make a
lot of money from each listing. And they have a far better value proposition
for the customer. Why would you use a real estate agent trying to pump the
price as high as possible, when you can use one who will be paid entirely
based on your satisfaction rating?

On the other hand, Zillow/Trulia have wider reach. There is nothing stopping
them from opening a brokerage in their most popular markets and simply copying
Redfin's model. But if they do that, they are already way far behind.

Personally, and I'm biased because I worked there, I think Redfin is going to
"win" this battle. There's no reason why Zillow/Redfin can't coexist
harmoniously, but I expect we will see Redfin making far more money in 10+
years than Zillow.

[1]
[http://en.wikipedia.org/wiki/Real_estate_broker](http://en.wikipedia.org/wiki/Real_estate_broker)
[2]
[http://en.wikipedia.org/wiki/Multiple_listing_service](http://en.wikipedia.org/wiki/Multiple_listing_service)

(EDIT since this is getting so many upvotes: I DO NOT SPEAK FOR REDFIN AT ALL,
I DO NOT WORK FOR REDFIN. I worked there one summer last year.)

~~~
smackfu
Isn't the MLS run by the real estate agents that RedFin is trying to disrupt?

>They depend on real estate agents manually inputting their listings into the
Zillow/Trulia platforms

Are you sure that Zillow isn't just scraping the MLS data from broker sites?

~~~
cjensen
I'm trying to buy a house right now in Fremont, CA. I can confirm that Zillow
has errors and omissions whereas Redfin has entirely accurate data. Every
Thursday my realtor sends me MLS listings; in every case, Redfin has the new
listings.

~~~
NickJohnsonCA
Hi CJensen! I'm part of the friendly team over at Movoto. Have you tried using
us? Send me at email at NJohnson@movoto.com and I'd love to help you in any
way possible.

------
scelerat
Just adding some anecdata to the chatter about these sites and the experience
of buying a home:

I began searching for a house in the East Bay about two years ago, culminating
in a purchase in June 2013. The first year or so I was using Redfin, Zillow,
and Trulia to track availability, prices and neighborhoods. While I got some
good information, it wasn't until I started talking to an agent with about
thirty years experience in the region that I actually got good leads. The
listings on all of these sites seemed to trail the MLS leads she would get by
days to weeks. I made several offers over many months, each one more than the
last, each time watching the stock get thinner and bids climb higher. My agent
was not only finding good potential properties, but also providing a lot of
perspective and emotional support.

The house I ultimately bought was something she found via her network of
colleagues before it even was placed on the market. I made a bold offer and
gulped at what I was putting on the table, but in retrospect I was fortunate
considering what's happening in the bay area housing market right now.

Maybe I'm a dummy, but I cannot envision going through the process without a
real human pro providing guidance and leads.

~~~
mikeryan
Funny I've bought two houses in Berkeley in the last 4 years (bought one, sold
it, bought another) both times I found the Redfin data to be spot on, ie new
listings every Thursday the same list I'd get from my agent. This won't beat
finding an agent with a listing before it hits the market but the East Bay is
hot, if I'm a seller theres no way I'm not putting a house on the open market.

The first house we bought my wife and I found on Redfin (we timed the bottom
of the market - by luck - and bought in December of 2010) and had a friend
who's an agent in SF just help with the paperwork.

The second time we had a Berkeley based agent (we worked with her to sell our
house so she got our "buy" work as well) but again found the house ourselves
on Redfin. During our 4 month search our agent never got us a lead that wasn't
on redfin. Truth be told if we buy again we may go the Redfin route, we really
didn't get a ton of value from our agent on the buy side of our transaction.
No way I'd sell a house without an agent however.

------
ssanders82
I trade stocks as a hobby and I was wondering what I'm missing here. This
morning Zillow offered .444 shares of Z for TRLA. Currently (1:50 pm EST) TRLA
is trading at only a 0.411 valuation of Z. What's to stop me from shorting Z
and buying TRLA to lock in the difference as profit? It seems both have agreed
to the 0.444 ratio. Is it a regulatory issue? What else would cause the deal
to fail?

~~~
chollida1
Look into merger arbitrage. Its a huge area that has spawned many hedge funds,
including the one I work at.

The difference is the market saying the deal might fall apart.

Some issues with shorting:

\- very limited borrow, not much more than 2 million.

\- very concentrated borrow.

\- the spot rate for us to borrow is 2-3%, but with such a small amount of
float avaiable to borrow the chances are high that you won't be able to get
any and you won't pay anything close to 3%

Here is a good primer:

[http://www.barclayhedge.com/research/educational-
articles/he...](http://www.barclayhedge.com/research/educational-
articles/hedge-fund-strategy-definition/hedge-fund-strategy-merger-
arbitrage.html)

------
hodgesmr
Zillow 2013 revenues: $225M, profits: -$12.5M

Trulia 2013 revenues: $175M, profits: -$17.8M

~~~
jquery
You would expect this from the two most innovative companies in the industry.
Both companies are leveraging their revenue to grow rapidly. A concern for
profits at this point is premature. Trulia was profitable years ago at a
vastly smaller revenue number.

~~~
elsewhen
profit isnt the only concern; the revenue numbers dont seem in-line with
companies that have such high valuations.

~~~
wpietri
Hmmm... Combined market cap is about $10bn, which is about 25x revenues. The
similar ratio for Google is 12x. Dropbox's revenue is reported at $200m with a
$10bn valuation, which is 50x. So the ratio doesn't seem crazy to me given the
assumption of growth potential and the ability of the new company to better
control pricing. When you say the numbers don't seem in line, what examples
were you thinking of?

------
themartorana
Does that leave any real competition in the space?

~~~
nilkn
Direct sources.

Here in Houston, nobody uses Zillow because their data is not reliably up-to-
date. The city has a custom solution: har.com. It's not as pretty, but it's
what all the realtors in the city actually use.

~~~
bane
Yeah, here in the D.C. area, nobody's using Zillow for much either since the
"Zestimates" are pretty wildly off of actual market value and even in between
homes in the same area.

For example, it puts my house at about $50k under my next-door neighbor's
house, despite my home being larger, with more upgrades (about $100k worth),
with one more bedroom and an additional full bathroom.

The identical house to mine, a block over, is $30k more than mine, but still
$20k under the neighbor's home. A home another block away, similar to my
neighbor's, but slightly smaller is actually on the market for $2k more than
theirs.

Another house, identical to mine, half a block over in a different direction
is Zestimated at almost $90k more than mine. And a similar house down the road
is on the market for $75 more than mine.

My neighbors, directly behind me, have a model one size smaller than mine, and
have done a tremendous amount of work on their home. Custom landscaping, high-
end playground for their kids, fences, completely remodeled basement, and one
more bedroom than my house, Zillow puts it at $10k under mine.

So within, basically 2.5 blocks, in a cookie cutter suburb, we have almost
$100k variance, with Zestimates _at least_ $50k under market prices in some
cases, and $50k _over_ in others, and smaller homes Zestimating to be worth
more than larger homes next door.

Believe it or not this is an improvement from a couple years ago, but no
reputable agent in my area uses Zillow for anything.

Trulia, by way of comparison, puts my house at $20k more than Zillow and flips
the relationship of small/big houses so they make slightly _more_ sense
pricewise.

Redfin seems to be the closest.

~~~
bhousel
>So within, basically 2.5 blocks, in a cookie cutter suburb, we have almost
$100k variance, with Zestimates at least $50k under market prices in some
cases, and $50k over in others, and smaller homes Zestimating to be worth more
than larger homes next door.

Zillow will only know what a house is worth when it is either sold or when you
have it appraised and manually enter the details. I don't think any reasonable
person would expect Zillow to know about improvements made (like work done
inside a house or landscaping).

My neighbor just listed his house for a price that I thought was kind of high.
He sold it within a day of holding an open house. My zestimate went up 2 days
later.

I think Zillow actually works surprisingly well, for what it does.

~~~
bane
> I don't think any reasonable person would expect Zillow to know about
> improvements made (like work done inside a house or landscaping).

Well sure, but one of the reasons local realtors have dumped it as a source of
information is that buyers and sellers were starting to latch onto the
Zestimates like they were gospel.

If a Zestimate was too high (like my neighbor's house), the seller would
insist it go on the market at a very high value, and then end up with a bad
relationship with their realtor when it didn't sell. Realtors don't have time
for this nonsense.

If a Zestimate was too low (like my house), buyers would want to negotiate
down under a fair market value. Again, realtors don't have time for this kind
of thing.

In either case, Zillow was skewing the market. And we're not talking by a
couple thousand dollars either, but on 20-40% swings.

In a neighborhood like mine, where the Zestimate is off by up to $100k from
one house to the comparable one next door, the Zestimate becomes a hindrance
on the fair market and causes more problems than it's worth.

It's like people getting medical advice off the internet, it's better not to
because it causes too many problems in the established industry and not in a
good startup "disruption" sense but in a "fucking everything up" sense.

The reaction from local realtors has been pretty swift and strong against
Zillow for these, among other reasons. In an area like mine, I'm not even sure
what it's useful for: the tax assessment fmv is wildly different, actual
buy/sell prices are wildly different, it provides almost no value for pricing
your own home to sell, and no value when buying a home that your local MLS
doesn't provide (and even worse it's frequently wildly out of date). I suppose
if I was looking for a rental it might provide some value, but the few rentals
in my area have long since been occupied and Zillow still shows them up and
available.

It's basically the worst kind of disinformation, close enough to look
reliable, but ultimately a waste of people's time.

------
rgovind
All real estate news and websites are biased and always suggest you that
buying a home is a god think. In the SF bay area, I hear real estate agents
speak on the radio. Before recession, they said you should buy a home
immediately so that rates may increase....Then during recession they say you
should buy a home as rates have fallen to historic lows..for last 1-2 years,
whenever you hear...they say the interest rates are low, so you should
immediately buy it, irrespective of dynamics between interest rate and price
of house.

I wish there was a website/service which actively debunks what real estate
agents, radio channels are propragating.

~~~
carsonreinke
`god think`

~~~
rgovind
Can you please expand...I missed any reference...if you meant one.

~~~
carsonreinke
You said "god think", I think you meant "good thing", unless I missed
something.

------
jscheel
I listened to Sami Inkinen talk about how proud he was that Trulia was the
underdog to Zillow several months ago. I assume that the acquisition talks had
probably already started, even as he was talking about this. I'm not incensed
at this, I just think we need to be honest with ourselves. When your
competition wants to buy you, then you've probably done something very right.
But everybody has a price and Zillow obviously found theirs! Congrats to them,
they've done a lot for dragging the real estate market kicking and screaming
into the future.

------
Cybernetic
It will be interesting to see how the home value estimates play out. Zillow
and Trulia each have their own methodology for determining a home's value and
the disparity between the value of each service lists can be significant.

I purchased a home two years ago in Portland, OR (South East). At the time of
my purchase, its price on Zillow was listed as ~$70K less than it was
appraised for (I had two appraisals and both were within $1K of one another).
Trulia listed the value within $1K of the two appraisals.

In two years time, the value on Zillow is listed as the original purchase
price. On Trulia, the value is ~$60K more (it is based on an average
appreciation of 8% annually of homes in my neighborhood).

I know a home's value is only what someone is willing to pay for it, but the
disparity in estimates between those two services has always bothered me.

~~~
Jemaclus
Most of the difference is likely just a matter of data. If Trulia has better
data than Zillow, their estimate will likely be closer to reality. There is
the added difficulty of coming up with what's basically one methodology that
has to work everywhere. My guess is that if you're in a funky place, like on
the border of two neighborhoods, or if you're in a rural area, your estimates
are likely to be further from reality than if you live in a cookie-cutter
subdivision or in a downtown area.

The point is: yes, it's frustrating, but it's also complicated.

------
carlmcqueen
A different article, which I'm having trouble tracing back now, mentioned that
this acquisition is more like the same company owning match.com and tinder.

Does anyone know if the intention to leave both up?

article: [http://www.bloomberg.com/news/2014-07-28/zillow-to-
acquire-t...](http://www.bloomberg.com/news/2014-07-28/zillow-to-acquire-
trulia-for-3-5-billion-in-stock.html)

"Rascoff said in an interview that the deal to buy Trulia signals that Zillow
is creating a portfolio of online real estate brands, which lets the company
appeal to the broadest audiences and attract the biggest set of real estate
advertisers. The strategy is akin to how IAC/InterActiveCorp (IACI) has
multiple online dating brands such as Match.com and Tinder, he said."

Seems odd to leave both up when they're so similar.

~~~
beeskneecaps
Well they bought hotpads + several others and left them up in this same way.
Acquire, put on back-burner, repeat. Not a bad strategy, I suppose.

------
Nicholas_C
It seems like every time I see an interesting deal Qatalyst Partners are
involved (Priceline/OpenTable, Elance/oDesk, Yahoo/Tumblr, probably some more
I'm missing). Those guys get to work on some really interesting stuff.

------
balor123
A question for the RE insiders here. What restrictions are there for building
services off Redfin/MLS and Zillow listings?

Am I allowed to blog about listings or do I need to be an agent to use image
and listing data? I get mixed opinions elsewhere about whether this falls
under fair use.

I notice that Redfin provides OpenGraph annotations but the TOS disallow
sharing. Am I permitted to share on Facebook, Pinterest, etc? What about on
other websites? Is it possible to build a vertical search engine based on
these details?

~~~
w4
You need an attorney for these sorts of questions, not a real estate insider.
These are IP and contract concerns, not real estate concerns.

------
LukeB_UK
As someone from the UK, I've never heard of either of these sites.

Kind of amazing that a business that's limited to one country can be worth so
much.

~~~
fludlight
Only when that one country has a GDP roughly the same size as the entire EU or
~6x that of the UK.

[http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomin...](http://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(nominal\))

------
epc
Curious how this impacts Streeteasy, which Zillow just bought some time in the
past year. Streeteasy is the defacto MLS (in a sense) for NYC (Manhattan
doesn't have an MLS, nor does Brooklyn. Uncertain about Staten Island, Queens
or Bronx).

~~~
metaphorm
New York City does have an MLS. Its run by the Real Estate Board of New York
([http://www.rebny.com/content/rebny/en.html](http://www.rebny.com/content/rebny/en.html))
and is called RLS (REBNY Listing Service).

Streeteasy simply never had access to RLS so they had to get their data from
other sources, primarily from scraping websites and emails, as well as some
direct data feeds from brokerages that agreed to work with them.

source: I work in technology in the New York real estate sector.

------
smackfu
The thread from when this was just a rumor:
[https://news.ycombinator.com/item?id=8081176](https://news.ycombinator.com/item?id=8081176)

------
bjorns
My first reaction was this headline has to come from a markov chain built out
of Business Insider and My Little Pony.

------
tindrlabs
Trulia was so much better then Zillow -- reminds me of Flipboard buying Zite.

~~~
genwin
I'm hopeful that Trulia won't get worse. I'd like to see the best of the two
sites available in one site.

------
lcm133
Don't sleep on Homesnap! * Snap a photo of any home to find out all about it *
Similar to Redfin in terms of model and data access * Unique iPhone, iPad,
Android and Web experience

[http://www.homesnap.com](http://www.homesnap.com)

