Businesses that have changed business models drastically
So Zillow is changing their business model drastically. They've been focusing on advertising agents and making money off those ads with a revenue of $2B. Now they're trying out house flipping and figure there's $20B on the table. Real house flippers and even the WeBuyUglyHouses people aren't really worried because they're only focusing on houses requiring small cosmetic repairs or just a few grand of repairs/improvements. They're not fixing structural issues, adding levels, digging down, putting in additions, or any of the other things flippers do to add value. But there are a whole lot of people who want to sell quickly, don't want to deal with what needs to be done to maximize selling price, and are OK selling at a discount. I imagine wholesalers might be a little buttman. But fuck wholesalers anyway.
Ford is phasing out sedans. No more Ford Focuses? What the fuck? I'll believe it when I see it though. Trucks and SUVs are popular now. SUVs only became popular in the '80s though. I maintain that they are preposterous vehicles for the majority of people who drive them. Personally, I'm a wagon man. I rented a loaded Ford Focus wagon in Germany and loved it. Well, I totaled that car via cement tuck impact. But I liked it so much, I got a wagon of my own after totaling my old car as well and making some nice pain & suffering money from my debatably orchestrated T-boning. A nice wagon with roof rails is the best of many worlds. So anyway, that's a fucking bold move on F's part. p.s. F is the ticker symbol for Ford. You finance nerds like that shit?
Dude I had another great example - the greatest, actually - which triggered this thread in fact. But I've been composing this thread inbetween impatiently waiting for new tabs to load and forgot my original point. Anyway, let's discuss companies that have done drastic pivots (we can also vote on whether you love or hate that term) - successfully or otherwise!
I rented a Ram 1500 in Texas and concluded the 1500 stands for 15mpg. I said that to anyone who would listen for the entirety of the trip. I got a cowboy hat and put it in the dash. It was glorious. That cowboy accompanies my hula girl on my wagon dash now. Really good look.
Oh and agents are all QQingabout about Zillow on some 'wah wah we're not the centers of attention anymore'; but honestly, fuck agents too. They are some whiney ass bitches terrified of change in large part. you should see some of these closed groups. they're a bunch of self-entitled scardie cats.
Zillow is now providing mortgage financing as well. They are trying to be a one stop shop where you can list and sell your home, find a new home and obtain a mortgage. I am curious to see if borrowers would rather use Zillow compared to local lenders, brokers and banks.
I would love your thoughts on how deep you think Zillow will be able to break into residential sales and mortgage lending.
I'm not real knowledgeable on this. Just talking out my ass. But I do think a company like Zillow is going to have a real hard time with anything remotely unconventional. If it's you and your wife and you both have W-2s and good credit and you're buying a nice new SFR, it's probably a good bet. But good luck getting a low-down mortgage on a multifamily that needs work in a family member's name with no W-2 income and using a HELOC for the down payment. They're not gonna deal with that shit. Personally, I'm very loyal to my lender. He's jumped through stupid hoops for us all. I'd be curious to see what their close rates are. A lot of people shop rates and end up with a discount online-only lender because they quoted them the lowest rate. Then the moment the transaction runs into a hurdle, which they often do repeatedly, they're bailing and you're left with your dick in your hand. I'm a fan of building a team of experience professionals who are local and who you know personally. But it will probably work out great for Zillow. Agents are arguably becoming less relevant in their traditional sense and Zillow is ahead of the curve. Also, the MLS syndicates to Zillow. Not to Zumper. Not to Apartments.com. But to Zillow. That's a huge advantage I don't think they're milking nearly hard enough.
You are right with online lenders that offer the lowest rates. They and Zillow have more difficulty dealing with borrowers that do not fit the conventional guidelines. Also, good luck getting in touch with them on the weekend, it will not happen.
I think that the commission residential realtors still receive is quite high (2.5-3% per side). You have companies like Zillow and Redfin making pushes in that space. It will be interesting to see how it plays out.
My buddy is a $100 million per year single-family mortgage loan originator. Almost all of his business comes via real estate agents who refer their client to him. To me this seems like it would be the most common way to get a mortgage, but apparently Quicken Loans does a lot of business (like, tops in the nation at around $100 billion annually), mostly via online sales and TV ads so I guess there is a model for that.
Both things can be true simultaneously. Mortgages are huge.
How does your buddy think his business will change if Zillow takes more market share away from realtors? Does he think he will see a decrease in volume?
Also, an interesting thing about Quicken is they offer wholesale/correspondent channels to brokers and lenders that competes with their retail business. Borrowers who go to a local broker/lender who then sell the loan to Quicken will get much better pricing than going directly to Quicken retail.
In general, he is not worried about any online competition (in mortgages or with real estate agents). His only real concern is if there is a fundamental shift away from real estate agents. But so long as people are using real estate agents his business will thrive.
I'm not sure there is 6% value in a real estate agent (what a seller has to pay), but there is definitely value. I'm a real estate pro (commercial, specifically) and I tried buying a house on my own and was so lost when it came to the specifics of the transaction that the selling agent took pitty on me and basically handled everything (and didn't charge me anything). I then tried to sell my unit on my own several years later and it was a laughable effort on my part; I hired a discount broker via Redfin and it, too, was a disaster. I then hired a strong real estate agent (on my mortgage banker friend's advice) and sold the place in a weekend, well over list. The average person really doesn't know what they're doing, so I think there is a long runway for real estate agents. I do think it's possible there is an economic shift in the industry, but I can't see agents going away.
I like Zillow's idea in that it will help upgrade the housing stock in a more efficient manner. Good for them.
Yeah, I agree. They found a niche that you sort of have to be that big to occupy.
Netflix has essentially changed it's model three times from shipping DVDs, to streaming services to, as of recently, producing its own content.
yeah you're right. speaking of that, amazon sold books. aint that some shit. now they sell fucking everything and will assemble it poorly too for you for exorbitant prices.
Amazon. They started off as an online book store and now look at what they've become.
they started off as a store and now they are... a bigger store?
I'm not sure if you're being sarcastic or being serious...
Amazon is definitely a lot more than just a "bigger store".
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5 stars on both of their google reviews. checks out.
IBM comes to mind. From computer hardware to tech and strategy consulting. Apple went from computers to effectively a phone company. GE went from appliances to lending.
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