Zip Realty to Close 11 Brokerage Offices. Reorients to emphasize personalized service. Huh.

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Cost-CuttingLate yesterday, Zip Realty announced they were shutting down 11 real estate offices across the country, including their Tucson brokerage.

For those not familiar with Zip Realty, they were founded in 1999 and have grown rapidly. They are usually considered a “discount” or “rebate” brokerage – according to their website’s buyers page they offer to rebate the buyer “up to 20% of the commission” they are paid by a seller. The ZipRealty.com website is consistently listed among the highest trafficked real estate web sites.

I’m not about to enter into a discourse on the differences, or viability, of the “full service” real estate brokerage versus the “discount brokerage”. I’ve said many times that I’m glad there are different brokerage models out there. Competition is good, different models are good. Good for real estate buyers and sellers, and good for real estate agents and brokers.

I was immediately struck however, by a statement in the press release announcing these office closures:

Zip’s restructuring plan includes: “Reorienting the Company’s marketing approach, initially in select markets, to emphasize personalized service, outstanding technology and experienced local agents that together connect consumers to great real estate transactions”

Sounds like Business 101 fundamentals to me.

The Thompson’s Realty “tag line” is “The Power of Technology with a Personal Touch”.  While I’m sure this sounds hokey and cliché to many, there was actually a lot of thought that went into that tag line. Technology (at least as “technology” is generally defined in the real estate vertical) is important. It’s allows for increased efficiency and lower costs. We try to utilize technology to help our agents better serve their clients. We use technology to “empower the consumer” (oh dear God, I sound like a Dilbert cartoon) so that they can learn more, and help us help them.

But without a “personal touch”, all the tech tools on the planet won’t help the real estate buyer and seller get what they are looking for – a closed transaction that minimizes their pain while simultaneously maximizing their gain.

Real estate is, and always will be, a very personal experience. Yeah yeah, there have been people claiming for years that the real estate agent is headed down the same path toward extinction as travel agents, brick and mortar book stores and other disintermediated (cutting out the middle-man) industries.

I don’t buy it. I wrote my first article on disintermediation in 2006. In that article I said:

Shopping for a book, or buying an airline ticket is not the same as finding a home and closing a sales transaction.

That article also linked to articles from some pretty well-regarded people proclaiming that the end was here for real estate as we know it.

That was over four years ago.

So they were wrong.

At least for now.

Sure, things could change. But I just don’t see real estate agents ever becoming completely disintermediated. I’ll say it again, buying a home that costs tens to hundreds of thousands of dollars is simply not the same as buying a book or plane ticket online. And it will never be the same.

So, what’s the point?

Zip Realty, a huge real estate brokerage with some assumedly bright people behind it, lost  $5.1 million dollars in the third quarter of 2010 (according to Inman News – and that article will slip behind a stupid pay wall later tonight).

So they are going to reduce their field sales support workforce by roughly 35%, reduce the corporate sales support and administrative staff by 25%, convert employees to independent contractors and close company owned and operated brokerage offices in eleven markets.

PLUS they are going to “emphasize personalized service, outstanding technology and experienced local agents”.

In short, they are going to get back to fundamental business practices –  that being reduce overhead expenses and provide superior service – that numerous small independent brokerages all over the country have been doing since Day 1.

Or at least that’s what they should be doing.

I say good on Zip Realty for finally waking up and restructuring and making organizational and philosophical changes to their business model. I wish them success. Maybe (hopefully) some of the other real estate brokerages that continue to apply maddening and often incomprehensible business practices will take heed and learn something from Zip.

I’m not holding my breath though. But I am holding out hope. At least until the day finally comes when I just can’t take slamming my head into the wall one more time. 

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About the Author
Jay Thompson

I'm a real estate broker in Phoenix, Arizona and the publisher of the Phoenix Real Estate Guy blog. I tend to drive too fast and scream at the University of Texas and Denver Broncos football teams. My two kids are smarter than most adults I know and my wife is simply amazing.

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