Zillow CEO Rich Barton denied the company is in the house-flipping business and said it didn’t launch an iBuyer to make money off home price appreciation, he said Monday at the company’s Unlock event in Las Vegas.
“If anyone thinks Zillow is doing Zillow Offers in order to make money on home price appreciation, they’re wrong,” Barton told Inman founder Brad Inman. “We are doing this as a service to sellers because sellers are telling us they are frustrated. They are telling us they want it simpler.”
According to its most recent public earnings, Zillow is still losing money on each home it sells, but the figure has been trending in the right direction.
As a publicly traded company, Zillow isn’t in the business of simply doing consumers favors, so Barton explained, with all of the data the company collects, it can dynamically create a fee to represent its own cost.
“We’re not flipping this property,” Barton said. “We’re not trying to get an artificially low price, we’re not trying to take advantage of anyone in a bad situation, we’re not looking to hold it and do a big renovation.”
“We’re looking to move it as quickly as possible and earn our money off the transaction fee. And ultimately because this transaction sits at the nexus of all of these adjacent markets that we know so well, that are big businesses in and of itself, they’re dying to be integrated into one thing.”
Zillow has already moved into some of those adjacent markets, like its home lending arm, Zillow Home Loans, which it launched after the acquisition of Mortgage Lenders of America.
“The totality of this, I’m highly confident there is a tremendous business for us and for our partners, not to mention great satisfaction for consumers,” Barton said.
The revelation came as part of a broader discussion about the changing landscape of the real estate industry, which has recently been marked by heavy outside investment from venture capitalists. Huge funding rounds for real estate startups such as Opendoor and Compass have drawn some criticism in the industry, but Barton actually believes there hasn’t been enough investment into the space.
“[Investment] is happening, but given the size of the opportunity it’s still woefully underinvested,” Barton said.
“Really?” Inman asked. “The billions that are going to Compass, Opendoor, you guys – that feels inadequate?”
“I think, this industry and opportunity deserve even more investment,” Barton responded.
Barton cited Zillow’s own recent effort to raise $1.1 billion in capital through a new offering of senior notes, essentially short-term bonds, which was met in just three days, to show the appetite for investing in the space.
One of the ways Zillow is using its immense capital is to build out software to meet the consumer’s need to tour homes anytime. Barton said the company is building artificial intelligence-enabled three-dimensional technology to create an immersive shopping experience – and maybe someday an augmented reality redecorating experience – from their phone, before they’re even in the home.
The whole transaction process is a snarl, according to Barton, who explained that the transaction is not linear. But through the use of technology, consumers can be rendered as data points. Software can know a whole lot about a consumer’s income and credit history, for example, to eliminate the need to fax your tax return from three years ago.
The conversation ended with a sort of rapid-fire question and answer section, where Barton revealed that he believes the National Association of Realtors has finally “woken up,” without providing further context and also that Adam Neumann is one of the most charismatic leaders he’s ever met, calling him a “fallen angel.”
“He’s so charismatic that I won’t let my wife be near him anymore,” Barton joked. “The only other man she talked about the way she talked about Adam Neumann … is Bill Clinton.”
“We had dinner with Bill Clinton when he was running and my wife was like, ‘Oh my god,'” Barton added. “So no more Adam Neumann.”
Upon being asked his views on Compass, Barton offered what, perhaps, was his most insightful answer of the day.
“If they raise money to spend on technology, they better spend it on technology,” Barton said.
