Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He’s also the co-founder of AgentLoop. He “selectively retired” in August 2018, but can’t seem to leave the real estate industry behind. His Inman column is published every Wednesday.
A few days ago, Zillow, a frequent industry punching bag, and Opendoor, also a foe to many in the real estate industry, announced a “multi-year” partnership. As one should fully expect, the reaction was swift, and contained a mixture of puzzlement and anger along with cheers and hope for one or both companies’ impending demise.
My initial reaction was, “I loved (most of) my time at Zillow. But there are moments I’m really glad those days are behind me. This is one of those moments.”
The “moment” is based on what I knew the overall reaction would be from agents. Even with my last day at Zillow being almost four years ago, I haven’t forgotten what it was like to deal with industry angst over Zillow. One need read no further than the first paragraph of the joint press release to know this announcement would not be well-received.
“Zillow, Inc. and Opendoor Technologies Inc. have announced a multi-year partnership that combines two category leaders to transform how people start their move. The partnership will allow home sellers on the Zillow platform to seamlessly request an Opendoor offer to sell their home.”
I don’t cheer and hope for the demise of any company (and don’t see that happening here for either company). I’m certainly not angry about what two public companies choose to do. Life is way too short to get riled up over something that you have zero control over and in the grand scheme of things will have little to no impact on you or your business.
But “puzzled” fits well with the thoughts crossing my mind while digesting the press release. Parts of it I get. For some parts, I need more information and some of it just mystifies me.
The things that make sense
Zillow has always had the consumer’s interest in mind. For years it has consistently expressed that real estate buyers and sellers, and those considering buying or selling, are their “North Star,” their guiding light, the reason they do what they do. Many agents are bitter about this attitude. “We’re the ones paying them! We should be the most important thing to them!”
Interestingly, those statements rarely come from agents actually paying Zillow. Those folks understand that without the consumers visiting the apps and websites, in droves mind you, Zillow wouldn’t have a product to sell. No one wants to buy advertising in an empty place. The more consumer eyeballs there are, the more often the “Contact Agent” button gets clicked. That’s not rocket science; it’s Advertising 101 and common sense.
Like it or not, iBuying is here to stay. It’s a viable alternative to a “traditional sale” for some, but certainly not all, sellers and buyers. Opendoor is the largest player in the iBuying space. Zillow is the largest player in the “portal” space. The consumer is Zillow’s North Star, and they want to give those consumers everything they want and need. They want to give them what they don’t even know they may want and need.
Giving the consumer alternatives makes sense, whether those alternatives be pre-foreclosures, FSBOs or iBuying. That’s a big reason Zillow ventured into iBuying and, yes, failed miserably at that. Now, an iBuying option is back on Zillow without the headache and expense of doing it itself.
For Zillow, partnering with Opendoor provides its users with the iBuying alternative. In return, Opendoor gets exposure to Zillow’s massive traffic flow. It’s a win for Zillow, for Opendoor, and for those visitors interested in alternatives.
The need for information
Most of the press release, which is really about all we know of this partnership, is straightforward. Sure, it’s full of fluffy PR-speak. Of course it is: It’s a press release. But when you boil it down, it’s about consumer choice: Zillow providing its visitors with visibility and the ability to utilize an iBuying service and combining Zillow’s audience with Opendoor’s “e-commerce” platform.
But there’s one sentence in the release that begs for more attention and information:
“Additionally, Zillow customers will be able to work with a licensed Zillow advisor who will serve as a helpful guide in understanding these options.”
Is this “licensed Zillow advisor” a Zillow Premier Agent (an agent who pays for advertising), or is it a Zillow employee who will be guiding these consumers? I don’t know. If I were a Premier Agent, I would want to know. Perhaps clarification has already been addressed with those agents. I’m neither a Premier Agent nor a Zillow employee, so I simply do not know. It certainly raises questions.
As a former Zillow industry relations director, one thing I do know is the phrase “licensed Zillow advisor” will make a lot of people lose their mind. I also know that Zillow’s world-class PR department crafts press releases with extreme care. That sentence is there for a reason.
The most intriguing, mystifying part of this partnership announcement is the timing.
On Aug. 1, the Federal Trade Commission (FTC) announced it’s taking action against Opendoor for allegedly “cheating” and “tricking” potential homesellers. The most newsworthy part of this action was a $62 million fine.
Three days later on Aug. 4, the multiyear Zillow-Opendoor partnership was announced. Not coincidentally, both companies also announced their second quarter 2022 earnings on the same day.
Although $62 million is a lot of coin, the fact is, per its Q2 2022 earnings announcement, Opendoor has $2.239 billion in cash and cash equivalents on hand. So, it can pay the FTC fine and still have $2.177 billion left. That’s $2.177 billion, with a “b.” While a $62 million fine would likely bankrupt anyone reading this article, it’s a mere drop in the proverbial bucket for Opendoor.
But the FTC announcement creates horrific optics for Opendoor, and by default, anyone associated with it. Associated with them, like partners.
The FTC destroyed Opendoor in its press release about the action against Opendoor. The title alone is rough: “FTC Takes Action to Stop…Opendoor…from Cheating Potential Sellers with Misleading Claims about its Home-Buying Service.”
“Cheating potential sellers” and “misleading claims,” and we’re not even past the headline.
From the first paragraph we have gems like, “cheating potential home sellers,” “tricking,” “using misleading and deceptive information,” “deceptive tactics” and “in reality, most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional process.”
It goes on. Paragraph two talks of “using old-fashioned deception” and has the Director of the FTC’s Bureau of Consumer Protection saying, “There is nothing innovative about cheating consumers.”
Zillow is being vilified across the real estate social space for partnering with a “cheater” who incorporates “misleading and deceptive information” in their business.
That’s kind of understandable. “You are the company you keep” and “Birds of a feather flock together,” as the old sayings go.
Oddly, and to be honest, ridiculously, some are saying Zillow initiated this partnership because of the FTC action. Yeah, on Monday the FTC spanked Opendoor and by Thursday a multi-year partnership deal was reached. That’s just nonsense. Partnerships like this don’t happen overnight (or in three days). This partnership has been in the works for weeks if not months.
Maybe the two parties were legally bound to announce the long-planned partnership on earnings day. I don’t know. Mergers, acquisitions and partnerships are not remotely an area of my expertise.
Nonetheless, there are the nasty optics of this mess. It simply looks terrible. Several sources point out that Opendoor first learned of the FTC investigation in 2019, according to disclosures made in securities filings for going public. They must have had some idea of how the investigation was going and where it was headed. Surely Zillow’s due diligence covered an ongoing FTC investigation.
Atrocious timing is the only way I can see it. Preventable? Again, I don’t know. You’d think there would be some clause in the partnership agreement that could terminate the agreement for things like a Federal agency calling a potential partner a cheater and deceiver. If not terminate, at least delay the announcement and forming of the partnership. One has to believe a flock of well-compensated lawyers for both partners were involved in this from the beginning.
Only those neck-deep inside the process know for sure. Maybe there was no way to terminate the partnership or delay the announcement. Maybe there was a way to do either or both and the decision was to barrel full steam ahead. Maybe they just don’t care about the negative perception. Again, I don’t know.
But I do know I’m glad I’m not in the industry relations/PR/communications teams for either company. I’d also bet money that, in time, this will blow over and people will latch on to another company, another product, another announcement that fires up the drama and speculation. That happens, every time.
I’ll be watching from the sidelines.
Jay Thompson is a real estate veteran and co-founder of AgentLoop living in the Texas Coastal Bend. Follow him on Facebook, Instagram and Twitter. He holds an active Arizona broker’s license with eXp Realty. Called “the hardest working retiree ever,” as the founder of Jay.Life, he writes, speaks and consults on all things real estate.