ZipRealty Inc. is closing company owned and operated brokerages in almost a dozen markets, and will begin emphasizing personalized service and the experience of its agents over the commission rebates and discounted listing fees the company was founded on.
The restructuring and organizational changes announced Monday — which also include a local referral agreement in the Atlanta market, a first for the company — are aimed at helping the brokerage "achieve positive cash flow" in 2011, the company said.
"It’s a tough decision to pull out of any markets," said Charles "Lanny" Baker, who took over as ZipRealty’s CEO and president, on Oct. 2. "We loved working with the agents in those markets, but our assumptions for growth in those markets had not been met."
The company says it will close offices in 11 markets that accounted for about 13 percent of the company’s revenue in 2010, and which were a collective drag on the company’s bottom line.
The brokerage offices to be closed include five in Florida: Naples, Jacksonville, Miami, Palm Beach and Tampa. In addition, ZipRealty is closing brokerage offices in Fresno, Calif.; Charlotte, N.C.; Hartford, Conn.; Minneapolis, Minn., Virginia Beach, Va.; and Tucson, Ariz.
In Atlanta, ZipRealty has entered into a referral agreement with what it described as "a leading local brokerage."
ZipRealty will power the brokerage’s online sales channel, and ZipRealty’s Atlanta agents — the company’s website lists more than 90 — will have the option of moving their licenses over to the unnamed brokerage.
Baker said there was no transaction involved — the brokerage ZipRealty is partnering with did not acquire ZipRealty’s Atlanta office — but all agents have the opportunity to make the transition. He said the incentive for them to make the switch is that they will benefit from the brokerage’s name, heritage, listings and advertising in the Atlanta market, while retaining their acess to ZipRealty’s technology platform.
ZipRealty currently operates in 35 markets in 22 states. Once it has completed the restructuring announced Monday — which is expected to produce $20 million in annual savings — it will operate in 24 markets if Atlanta is included, and in 20 states. The company will no longer have a presence in Minnesota and Connecticut.
The company also announced plans to shift its marketing approach "to emphasize personalized service, outstanding technology and experienced local agents that together connect consumers to great real estate transactions."
Baker said that’s a departure from an emphasis on rebates. In markets where ZipRealty has a leading market share, it will emphasize the experience and connections of its agents rather than the company’s reputation as a discounter.
The goal is to change the perception of the company — for now, the company has no plans to reduce the commission rebates it offers to buyers. Although ZipRealty advertises itself as willing to offer commission discounts to sellers, those discounts are negotiated on a case-by-case basis.
ZipRealty said it will also open up more of the company’s website to users without requiring them to register.
The brokerage operates a "virtual office website," or VOW, that allow consumers to access more extensive information than operators of Internet data exchange, or IDX, listing sites are allowed to provide. The trade-off for operators of VOW websites is that multiple listing services typically require consumers to register to use them.
Baker said there’s a lot of non-VOW data on the ZipRealty site that consumers should be able to access without registering. ZipRealty will continue to offer more extensive information to users who choose to register, he said.
In announcing a $5.1 million third-quarter loss in November, ZipRealty said it planned to transition all of its agents to independent contractor status by the end of this month as a cost-cutting measure.
In the following weeks, ZipRealty began filing notices with state regulators about the changes, triggering media reports that the company was pulling out of states such as Pennsylvania and Florida altogether.
Although ZipRealty says it will retain a presence in those states, Monday’s announcement makes clear that the brokerage is in fact closing some of the offices previously named in filings related to the Worker Adjustment and Retraining Notification (WARN) Act, a federal law requiring notification to state and local governments about employment site shutdowns and employment loss.