Zillow Group (Z) is positioning itself to take the lead in bringing the entire home-buying process online.
During a Tuesday call with investors, Zillow CEO Spencer Rascoff revealed Zillow’s reasons for acquiring DotLoop, a Cincinnati-based company that aims to simplify real estate transactions by enabling brokerages, real estate agents, and their clients to share, edit, sign and store documents digitally, and what Zillow plans to do with DotLoop.
The short version? Rascoff believes the time of the paperless transaction is now, and believes that Zillow and DotLoop are well-positioned to lead the revolution.
“DotLoop is very exciting for us,” Rascoff said during the call. “There is no question that real estate transactions are moving online, any of you who have bought a home, know that signing hundreds of pages of documentation is a burden and that the day of the paperless transaction is here now, and DotLoop is the clear leader in the category.”
Rascoff said that Zillow’s acquisition of DotLoop allows the company to provide increased value to the industry by bringing the paper-heavy real estate transaction online, from “the creation of a listing agreement to the submission of offers to the actual closing.”
So how much does Zillow believe in DotLoop’s potential? $108 million worth. That’s how much Zillow will pay to acquire DotLoop.
The acquisition price was not disclosed when Zillow first announced the DotLoop deal, nor did Rascoff discuss the price during the call Tuesday, but Zillow did disclose the price its paying for DotLoop in a Tuesday filing with the Securities and Exchange Commission.
In Zillow’s 10-Q filing, it discloses that the purchase price for DotLoop will be approximately $108 million in cash, “less certain transaction expenses and as adjusted at closing based on DotLoop’s net working capital, cash and debt, plus the estimated fair value of substituted stock options attributable to pre-combination service.”
The deal is expected to close during the third quarter, and Rascoff said that Zillow’s choice to pay for DotLoop in cash is an indication of the company’s belief in its potential.
“The consideration for DotLoop was substantially in cash,” Rascoff said in the call. “The decision to use cash with retention incentives in stock reflects management and the (Zillow board of directors’) confidence in the long-term opportunity for Zillow Group and our overall sensitivity to dilution.”
Rascoff is by no means alone in thinking that the real estate transaction is moving online.
In fact, the Consumer Financial Protection Bureau announced Wednesday that it finished its study on the benefits of electronic closings, and found that eClosings lead to better consumer understanding, a more efficient process and greater feelings of consumer empowerment.
“While technology alone will not address all consumer concerns in the closing process, our study showed that eClosings do offer the potential to make the process less complex,” said CFPB Director Richard Cordray. “We expect this pilot project and its findings to help inform further innovation that will be a win-win for consumers and industry alike.”
According to Rascoff, this is just the beginning. Rascoff said that nearly half a million people per month sign real estate documents using DotLoop, and the potential for the service is exponential.
“We think that we can expand DotLoop's market share by applying Zillow Group resources to it and by partnering with the 10,000 brokerages that partner with Zillow Group and the many tens of thousands, around 100,000 Premier Agents,” Rascoff said.
Rascoff also said that he believes DotLoop can do for the real estate transaction what Zillow itself did for real estate searches.
“The way I would characterize this acquisition is that we've spent the last 10 years innovating on the search process, helping consumers select what home they want to go see and buy, and we intend to apply as much innovation to the transaction itself, as we have to the search process,” Rascoff said.