At the 2003 National Association of Realtors annual convention in San Francisco, an industry trade publication showed a spoof video that morphed media mogul Barry Diller’s face into Saddam Hussein.

The video was intended to be humorous, but it speaks to the recurring theme of fear when a new entrant comes into the real estate industry.

Speakers during the conference used phrases like “waging war on real estate commissions” and “tariff models” to describe Diller’s well-capitalized foray into real estate with the purchase of LendingTree that year. Industry muckety-mucks said Diller’s plan to be the first point of contact for consumers was a direct aim at Realtor commissions.

The hyperbole fueled fear among the Realtor troops.

Last year and again this year, banks are the enemies for Realtors to fear. Before Diller, Microsoft and AOL were the “lions coming over the hill.” In the 1990s, Cendant scared the industry, and in the 1980s, the industry warily watched Sears and Merrill Lynch, which each had bought big real estate firms. In the 1970s, RE/MAX founder Dave Liniger’s groundbreaking commission-splitting model was the threat.

Today, Zillow is slipping into the industry’s fear radar. Reactions to Zillow’s home-valuation tool that launched in beta this month were mixed – many were critical and dismissive, pointing out all the reasons that Zillow will never work.

Product review is normal, but irrational fear sets in when critics speculate on what a new entrant might become.

In Zillow’s case, that irrational fear appeared in speculation that the Seattle company would become a broker and get its hands on the coveted MLS data.

The company will not become an agent nor act as an agent in any real estate deals, but is exploring options to improve the breadth and accuracy of its data and becoming a broker in multiple states is something that could help, a company spokesperson has said.

Zillow is licensed in Washington and at least four other states and is planning to add more, and the company also has joined the Northwest MLS in the Seattle region.

The uncertainty of this new entrant’s long-term plan is fueling an old fear that a powerful company will interfere with the traditional real estate model.

Zillow’s beta launch was widely discussed on the Web through newspaper articles and blogs. Jonathan Miller, CEO of Manhattan appraisal firm Miller Samuel, wrote about the launch and media frenzy on his blog, The Matrix:

“As far as the media coverage goes, I find it interesting that technical tools like this are often painted as spelling the end of full-service brokerage services. I find this point hard to accept. I think that tools like Zillow and others are a natural evolution of technology and special services like this offer something that full-service brokers cannot provide and really aren’t in business to provide.”

Mary Umberger at the Chicago Tribune wrote that, “The news media, industry Web sites and bloggers spent months postulating that Zillow would be everything from a national multiple-listing service to an online transaction manager. Real estate agents fretted that he was about to put them out of a job, as Expedia had done to many travel agents.”

In the past, fear over new big entrants has turned out to be irrational. Microsoft did not wipe out real estate agents like everyone thought. And Diller has not caused agent commissions to dwindle.

By offering a free, no-strings-attached look at property data, Zillow has a genuine shot at developing a relationship with real estate consumers that the industry has missed on the Internet.

While CEO Richard Barton has said he doesn’t claim to have an answer for new commission models, he does expect real estate business models to change over time as consumers become more knowledgeable about the home-sale process.


Send tips or a Letter to the Editor to or call (510) 658-9252, ext. 133.

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