This report is available exclusively to subscribers of Inman Intel, a data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.
CoStar Group has long been a giant in the real estate industry, across commercial, residential and data and analytics.
The company acquired Homes.com in May 2021 for $156 million. The online real estate information company had also acquired Homesnap at the end of 2020, but by June 2023, decided to sunset the brand in order to transition users to Homes, the more recognized brand of the two.
Last month, Homes.com hit over 100 million unique visitors, besting Realtor.com’s and Redfin’s average monthly unique visitors for the first time since the acquisition took place, making it the No. 2 most trafficked listing portal after Zillow.
Intel spoke with CoStar founder and CEO Andy Florance when the news broke about Homes.com’s recent rapid growth, to talk about the portal’s progress, as well as other pressing industry issues, including the recent National Association of Realtors sexual harassment scandal and the ongoing bombshell commission lawsuits. Here’s what Florance had to say, edited for brevity and clarity.
Intel: To what do you attribute your latest traffic numbers? How did you beat Realtor.com and Redfin?
Florance: I know we’ve surprised everybody. Probably a lot of people are sort of adjusting their perceptions right now.
We’ve been at this for a long time. We have more experience than anybody in real estate technology and real estate, for sure. We have a long track record of building up traffic on various sites and going from acquiring companies that are, you know, No. 5 or 6 in traffic and building them to No. 1. We reimagined Homes.com from scratch, everything is rebuilt from scratch. From day one, we’ve taken very experienced teams in SEO, SEM, UX and content, and this has been our single highest priority for the last 12 to 18 months. I probably literally work on this seven days a week.
[It’s] a very experienced group and committed, and I would also [add this is] what differentiates us in the market: I think first and foremost [is the] ‘Your Listing Your Lead’ business model.
It’s a much cleaner experience to have consumers come to the site if they are interested in the home, engaged in a home, being able to simply click through to the person who has the listing and knows more about the listing than anyone else is a better consumer experience. So I think we’re getting credit for that. We know that we’re generating millions of leads already for agents and we’re not taking any commission splits. It’s a no-friction system. And we’re saving agents billions of dollars in commission splits referrals, as we should. We’ve got a super fast site, engineered from the ground, super clean, there’s no programmatic advertising, really solid SEO strategy, unique and proprietary content that can’t be found anywhere else.
And it’s just grown a lot faster than anyone thought. And I would say that a year ago, probably people were pretty skeptical that we could build the sort of consumer audiences you need to be very competitive here. But I think the fact that one year in for the new site, to have grown to 100 million [unique visitors] in a month clearly shows that we’re there. If you take our rental and home site, which is the apples to apples comparison, we now have 160 million uniques. And that puts us at more traffic than Redfin and Realtor combined. So I think it’s just a better business model.
It is an accomplishment. And I’m wondering, do you have your sights set on besting Zillow’s traffic next?
So if you said, ‘Okay, great, you got 160 million uniques in a year. What do you guys gonna do now?’ The answer would be 320 million uniques. So we are 100 percent focused on being the No. 1 most heavily trafficked site. I think we’re sober and understand how much hard work that is. And that we are committed to that. We’d love it if everyone continued to underestimate us. Nonetheless, we’re going to push it forward. We want to be No. 1. So it’s probably too early to count us out.
You mentioned the ‘Your Listing, Your Lead’ business model is perhaps one of your top value propositions. But some in the industry have said the model seems like a way of promoting dual agency, and have questioned whether that’s really good for the consumer. What do you say to that type of criticism?
I would say that that’s hollow criticism, and it’s disingenuous. It’s basically a talking point from someone trying to defend a lesser business model.
Let’s just start with the agents. The agent’s job is to sell the sellers house, that’s their first and foremost job. So when someone wants to express interest in that home, they want the consumer to be able to find the information they want right away and to develop the interest. It doesn’t help the seller sell the house if the potential buyer is diverted away from learning about the house and instead is routed into some call center and sold like a piece of meat for a buyer agency fee. And if you take it from the buyer’s perspective, it’s quite the opposite of what that criticism says. On our site are hundreds of thousands of agents that you can browse through and search and filter and we’re presenting those buyer agents on our site for everyone to see with beautiful photos, their listings, their descriptions of their skill set, their history of buying and selling houses, and are presenting that to the consumer based on the agent’s qualification. We’re not presenting to the consumer because they’re gonna give me 40 percent of their split.
So actually, our [model] is more honest when it comes to promoting buyer agency. And so a buyer coming to our site will be given one of the sites where you’re going to find the best place to find a buyer agent, the most information. It doesn’t help buyer agents’ reputations when a portal serves up an inexperienced buyer agent, simply because they’re willing to give half the commission to the portal. Buyers are best served by getting experienced, expert agents in the area the buyers are interested in, and that’s what we do. If you think about the last 100 years in real estate, agents have put their signs in the front lawn of the house for sale with the agent’s name and phone number. So we’re not doing anything new. We’re just doing exactly what the industry did before Zillow started taking 40 percent commissions. And Zillow’s best retort is whatever you just said.
That’s an interesting way of thinking about it, harkening back to the agent’s sign in the front yard.
Flip it, and imagine that the agent puts the sign in the yard. That’s just taking it back to bricks and mortar reality. So the agent puts out their sign saying this house is for sale with their picture on it, their phone number and their company logo, and then a little truck shows up that says ‘Zillow’ on it, and they spray paint over the agent’s name and they spray paint ‘contact agent’ and put a phone number that goes to Zillow. How does that promote buyer agents? It doesn’t, it’s just an outrageous act. So it doesn’t work. And the proof that that whole thing doesn’t work is the financial performance of the companies that do it — they don’t do well.
All of what we’re talking about is of course very much related to the bombshell commission lawsuits that RE/MAX and Anywhere recently settled. What do you think about the recent settlements and where do you see the unresolved portions of the lawsuits going? [NAR, Keller Williams, HomeServices and its subsidiaries have yet to settle and the case may go to court.]
We’re doing the business model we’re doing because it’s the right business model; we’re not doing it because those lawsuits are happening. We have no involvement in them, but we watch them closely. I think that overall, I’m kind of amazed at how those lawsuits are not getting more attention than they are. I think they’re huge and I think they have the ability to transform the industry.
So in the United States, we’re unique in having anything like this, this doesn’t exist anywhere else in the world. And clearly, the buyer commission rule has fostered buyer agency in a way that it hasn’t anywhere else in the world. I know that the Department of Justice is weighing in on it and is opposing the settlements. And I know that this is a top priority for DOJ and for the White House because this impacts a lot of Americans. So the government, if they feel that Americans are being in any way mistreated in the most important purchase they make in their life, that’s an issue for them. So I think that it’s big.
I do think that what it’s going to do is cause a lot of transition as it goes. But I don’t think it changes the need for homesellers and homebuyers to have an agent in the process. The agent themselves is not going anywhere. Because people will continue to want good real estate agents, but I believe that it will turn everything on its head and cause a lot of things to be refactored.
In the United States, we have about 145 people per agent. In Europe, just probably 3,000 people per agent. So we have more agents than other countries do. I think that if things do shift, I think you might end up with more agents keeping more of their commission, but I don’t know. But that’s certainly what happens in the rest of the world. And dual agency is the norm everywhere in the world.
If I were a real estate reporter, I think this is the story of the century.
It is definitely big, and it will be interesting to see exactly how it plays out.
One of the things about it is, the existing master first-gen portals are the only place in the world that these business models exist that Zillow and Realtor.com use in the United States. No one else has it anywhere in the world, and they only do it because of the existence of the buyer broker commission rule. I don’t believe their business models work at all if that rule is eliminated. The ability to have a buyer reach out and be able to have Zillow take 40 percent of the commission only exists because of that buyer broker commission rule. If it’s eliminated, I think the existing portals have to completely reinvent their business models. That’s challenging — if you’ve just gotten rid of iBuying, and then you have to get rid of Premier Agent … But who knows? The thing that I’m breathing a sigh of relief about is that our business model, ‘Your Listing, Your Lead,’ we didn’t go anywhere near that whole thing.
Yes, that seems very fortunate — or smart.
I’ll be honest with you and say two parts fortunate, one part smart.
Good for you all. In addition to of all of this, there’s been a lot of shakeups at the National Association of Realtors recently with the sexual harassment allegations that came to light, and I wanted to get your take on that as well. What do you think NAR’s future looks like at this point?
That’s a seriously tough question.
I am a fan of NAR’s, I’m a fan of these firms and I think that our company derives massive benefit from the MLS’s. And I think the MLS’s aggregate outstanding content for the benefit of everybody.
It worries me a little bit to see these challenges coming up, and I don’t think any entity is infallible or untouchable. So I don’t know how it’s going to come out. But I do think that for sure the MLS’s provide massive value to all the participants in the industry and it would be a shame to see that interrupted.
It’s fantastic to reach 100 million [unique website visitors] in a month. It’s a real testament to all our team. But one of the great things is, if we have a four-step plan, we’re on step one. So we have more things coming up in ’24 than we produced in ’23. And I think we will be very visible in 2024 and it will be pretty exciting to watch.