Payam Zamani, CEO of Reply! Inc., was one of many online real estate executives who was happy to hear this morning about ZipRealty’s initial move to go public. Executives agreed the move validates the online real estate space and shows that the Internet has caused significant changes within the industry.
The online brokerage’s success is evidence that the Internet now plays a key role in the home-buying process. As investors take a deeper interest in Zip and its competitors, the industry must now view online real estate companies as serious players.
“In the long run, this will only have a positive effect by bringing more capital to this space,” Zamani said.
If all goes as planned, ZipRealty will be the first online realty brokerage to go public. The company was launched five years ago by a pair of U.C. Berkeley graduates–Juan Mini and Scott Kucirek–with a plan to change the real estate industry.
Zamani’s company, Reply! Inc., operates AgentConnect, an online service that matches consumers to real estate agents. He believes Zip’s public offering is the first of many to come in the online real estate segment.
And with online real estate companies ServiceMagic, HomeGain and HouseValues reporting profitability, Zamani may not be far off in his prediction.
Zip had revenue of nearly $34 million in 2003, according to the company’s registration statement with the Securities and Exchange Commission. The IPO could raise as much as $69 million.
HomeGain President John Baker said ZipRealty’s success further proves that companies using the Internet to create a niche within an existing industry structure are succeeding. However, he believes traditional real estate brokerages will continue to play an important role in the industry.
“There’s plenty of room in this world for both models,” he said.
HomeGain is an online real estate company that matches home buyers and sellers with Realtors. The company’s founder and CEO Bradley Inman is also the founder and publisher of Inman News.
Baker expressed admiration for ZipRealty’s ability to reach out to the online market of buyers and sellers. He said a friend of his recently used HomeGain’s services to sell a home, and ZipRealty’s services to buy one. Both transactions were valued at more than $1 million and both involved Realtors to facilitate the deal. He said his friend’s experience was a nice example of proof these business models work.
Baker’s anecdote also proves the Web hasn’t cut realty agents out of the transaction, a fear many in the industry had when companies started going online.
“The Realtor is empowered by the Web. They’re not chauffeurs anymore, they’re dealmakers,” he said.
Chris Larsen, CEO of online lender E-Loan, which is a public company, noted there is enormous potential for online real estate companies. Zip’s move to go public will draw more attention to this segment from investors and consumers, he suggested.
“Real estate clearly has been identified as one of the five core industries dramatically changed by this kind of Internet efficiency and transparency,” Larsen said.
Zip uses technology efficiencies to reduce the need for bricks and mortar. The company instead uses those funds to offer a rebate to consumers, while still earning a strong margin. E-Loan takes the same approach with consumer lending. The company offers a full range of mortgages, home equity loans, auto loans, credit cards, education loans and personal loans online.
HouseRebate, a national discount real estate brokerage, does most of its business offline, but considers Zip to be its main competitor because of those rebates and discount commissions.
HouseRebate CEO Brian Yui said the attention Zip will get by going public will help make consumers more aware that there are alternatives to the traditional, full-commission companies.
“More than anything else, it validates the concept that technology has spread throughout the industry…that services can be provided to consumers at lower rates due to the efficiencies of the Internet,” Yui said.
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