Amazon Gambles on Real Estate Industry

Amazon wants a slice of the $900Million Zillow advertising revenue and the $100 Billion US real estate commission pie.

I had thought that it would make sense for the retailer to sell homes – but not in the way they’ve done so.  But many questions are on the table at this point.   Is Amazon going to disrupt the industry and replace people with robots? Will Realogy be saved? Why would Bezos jump in head first with Realogy?  Is  the sky falling?

Yes, this was photoshopped. Poorly.

Inverse Trajectories

Realogy’s stock has been taking a pounding for two years prior to the announcement and four years ago was as high as $48/share.  Last week Realogy was trading just above $5/share.  

Amazon, however, has grown in four years from $400/share to just under $2000/share.  Overnight, with the announcement there was an outstanding 20% uptick in Realogy stock – a big win for the troubled “dinosaur” (Brad Inman quote).

With the agreement, the two companies are aligned to help buyers find and purchase homes.

Amazon and their AI will help people find homes from its site – and transfer the leads directly to 3000 specially trained Realogy agents who will facilitate the purchase.

After the closing on the new home, Amazon offers buyers a credit of up to $5000 on Amazon services (related to the home such as painting and landscaping) but primarily as a way to continue its smart home push.  Amazon found success selling its echo and Alexa equipped devices as people find it very convenient to search via voice. At this point Amazon is likely the leader in voice search and with this partnership will see its lead proliferate.  By partnering with Realogy, it is essentially placing the Alexa hardware in more homes, and the search platform is more readily available to those consumers enabling them to buy more goods and services via Amazon. Pretty brilliant idea – let’s see how it’s executed. 

I really didn’t see this partnership coming. I’d long believed that Walmart was going to partner with the industry first since they have 3300 locations to host the closing of transactions.  Wrong!

Reaction is split

The folks I’ve talked with at Inman Connect Las Vegas this week are pretty split: Big deal / Just a media flash in the pan. I am looking forward to seeing the homes on the platform and hearing success stories.

At dinner the night before the announcement, a tweet from a friend alerted the table of us that news from Realogy was coming in the am.  3 of the people represented Coldwell Banker, BH&G and C21 (all Realogy brands).  

We discussed if any move could save the fate of the sliding company.

I proposed a question to the table – here’s $1MM:  invest it in something real estate related – but hold it for 20 years.

Where would you invest the money?

The table was thoughtful and presented several good ideas.

2 picked SecondCentury Ventures (NAR’s tech fund) < I like this direction, depending on the fund.

1 Zillow

1 Wanted to put it into his own independent brokerage 

1 Realogy (I think since the stock was so low, they’d likely get bought out by Warren Buffet’s Home Services of America or Redfin or Opendoor)

1 Opendoor

1 picked physical real estate (or a portfolio)

The table decided in consensus the latter was the safest bet.  Physical real estate is still the best and safest bet for the long term.

I think that dinner game summarizes where the industry is and is headed.  The more technology, bells, and whistles that hit the market, the more agents get concerned about their future.  Technology, however, continues to not replace agents, but assist them in a wide variety of their jobs.

People are still key to relationships  and relationships sell more real estate than anything else – by a landslide.