Who will be the Amazon of housing?

Zillow, Redfin, Opendoor (and maybe Amazon itself) are battling for the future

The story of Amazon is as widely known as it is apocryphal at this point. The online monolith started from modest beginnings, with Jeff Bezos and a handful of others running the company out of a garage in its early stages. 

The company started small, simply selling books online, with Bezos and team personally packaging up customers’ orders and taking them to the post office themselves. 

Eventually, the company grew, but even in Bezos’ wildest dreams, he couldn’t have conjured up what the company would become: one of the businesses that has changed the face of the world economy over the last few decades.

And now, despite the complaints about how Amazon is run (the company’s treatment of its workers and drivers, the amount of taxes the company pays compared to its size and revenue and numerous other issues), the company is one of the few that are synonymous with their industry.

When one thinks of online shopping, they think of Amazon. 

Put simply, Amazon reshaped the entire retail landscape, changing how people shop, what they expect of their retailers and what they expect of other companies they deal with. It came from nowhere and now it’s resting comfortably at the top of the mountain while everyone else scrambles for whatever is left over. 

But Amazon didn’t invent online shopping, retail, video streaming, music streaming or any of the other business segments that the company is into now. What it did do is take what others had done, improve upon it by a dizzying degree, and market it brilliantly. 

The company’s dominance has inevitably led to questions of what’s the next company to so thoroughly disrupt an industry that it reshapes the way that industry works. 

“Who will be the Amazon of ______________?” 

It’s a question that’s been bandied about in housing circles for years: Who will be the Amazon of housing?

Is there a company out there that has the capability to disrupt housing to the same level that Amazon did retail? Is there a company that can become so dominant in housing that it could put some seemingly indestructible company entirely out of business? 

Well, some are certainly trying.

In fact, there seems to be a race to see which company becomes the first to be the first true one-stop shop (an Amazon experience, if you will) for buying and selling a house, the company that enables a buyer (or seller) to buy (or sell) their home with the ease of buying a new pair of headphones on Amazon.

Search, like, click, buy. That’s the goal, for headphones, and for houses, or so it seems.

And why is that? Blame Amazon (and other monoliths).

Amazon, along with companies like Apple and Google, have changed and are changing what people expect of the companies they deal with across every industry. 

Companies like Amazon make things simpler for customers because that’s what customers want. And that builds up an expectation from customers that things are supposed to be that simple everywhere. Then, companies are forced to make things simpler because customers now think that’s par for the course.

Basically, it’s a symbiotic relationship between companies and consumers wherein companies making things more simple for customers leads to customers wanting things to be that simple across the board, which then leads to companies needing to make things simpler to keep up with the competitors and satisfy their customers.

Where do you think the phrase “Push button. Get mortgage.” came from? Quicken Loans sensed that shift in customer behavior and expectation, built a mortgage experience around it, and marketed the hell out of it.

And while Quicken Loans’ Rocket Mortgage has had a tremendous impact on the company’s mortgage business, even Quicken Loans isn’t trying to position itself as a one-stop shop…yet.

Meanwhile, companies like Zillow, Redfin, Opendoor, loanDepot and others are all fighting to be the one that brings the entire home shopping experience to customers in cohesive and continuous journey where the customer gets everything they need, from finding the house, touring the house, selecting the house, financing the house, to closing on the house, all in the same place and all with the same company.

Of all the companies moving towards the one-stop shop model, Zillow might be the most interesting one.

It was just over four years ago that then-Zillow CEO Spencer Rascoff made the company’s mission clear, stating that Zillow was a media company, not a real estate company.

“We sell ads, not houses,” Rascoff said in 2015. “We’re all about providing consumers with access to information and then connecting them with local professionals. And we do a great job of giving those local professional high-quality lead, they’ll covert those leads to at a high rate and then want more media impressions from us. So we’re not actually in the transaction, we’re in the media business.”

But that all changed last year when Zillow joined the burgeoning iBuyer market and began actually buying and selling houses.

Through its “Zillow Offers” program, Zillow buys a home directly from a seller, makes the “necessary repairs and updates” and lists the home “as quickly as possible.”

And the company has big plans for its direct buying business. The company said earlier this year that it plans to buy as many 5,000 homes per month within three to five years.

But Zillow didn’t stop there. 

Last year, Zillow announced that it was getting into the mortgage business by buying Mortgage Lenders of America. 

At the time, Zillow said the acquisition of Mortgage Lenders of America would allow the company to “streamline and shorten the home-buying process for consumers who purchase homes through Zillow Offers.”

The company later rebranded Mortgage Lenders of America to carry the Zillow name, officially launching Zillow Home Loans earlier this year.

And while the company touts Zillow Home Loans as a way to ease the home buying process for those buying a home directly from Zillow, the company also states that anyone who wants to can obtain a mortgage through Zillow Home Loans, assuming they’re approved, of course. 

And Zillow has big plans for its mortgage business too, claiming that its goal is to originate 3,000 mortgages per month. 

If that happens, that’d likely make Zillow not as big as the big banks, Quicken Loans, and the like, but still substantial. With room to grow.

Add it all up and theoretically, a homebuyer can now find their next house on Zillow, buy it through Zillow, and get their financing through Zillow too. 

Opendoor seems to have a similar mission, although the company started from a different place.

Instead of starting out in the real estate listings space before expanding into other parts of the transaction as Zillow did, Opendoor started out as an iBuyer before expanding.

Opendoor launched as a direct buyer in 2014, starting out initially in Dallas-Fort Worth and Phoenix before expanding to Las Vegas, Atlanta and other cities.

Last year, the company announced that it is taking its platform nationwide and plans to be operating in 50 cities by the end of 2020.

But Opendoor wasn’t content with just being an iBuyer. 

The company, which has been raising money hand over fist for the last several years and was recently valued at nearly $4 billion, quietly expanded into mortgages and title a few years ago, and is also connecting home sellers directly with homebuilders to facilitate an all-in-one home selling and newly built home buying process, which it calls a “trade in.”

Beyond that, Opendoor made a big move last year when it acquired Open Listings, a tech-focused real estate site that offers homebuyers a 50% refund on the fees their real estate agent would have received.

Open Listings launched in California in 2015, expanded into Seattle in 2017, and operates in several other markets as well.

Open Listings allows consumers to find, tour, and buy homes through its platform. Real estate agents only come into the process when it’s time to make an offer on the home. 

Therefore, the company can offer a rebate on the buying agent commission.

With the acquisition, Opendoor is able to buy a home directly from a seller, then help that seller find a new home (whether it’s a newly built home or an existing one), offer them a mortgage, and close on the sales through its own title operations.

When it announced the acquisition, Opendoor said that it planned to expand the real estate site’s services into all of the markets where Opendoor operates and plans to operate in the future.

“By integrating Open Listings with Opendoor’s mortgage, title and home services, the company will make it as easy to buy, sell or trade-in a home as it is to hail a ride, book a flight, or shop online,” the company claimed.

And in just the last few months, Opendoor launched massive expansions of both its mortgage and title businesses, aiming to ramp up those additional business segments and deepen its relationship with its customers.

In late August, Opendoor launched its own mortgage company, called Opendoor Home Loans.

When the company first expanded into mortgages in 2017, Opendoor said that it would be lending to people who sell their house to the company to help them purchase their new house.

But with this expansion, Opendoor said that its mortgage business will not be limited to people who want to buy homes from Opendoor. According to the company, anyone who wants to buy a home can use Opendoor as their mortgage lender.

The company rolled out this expanded mortgage operation in Arizona and Texas, and plans to expand it nationwide.

Just a few weeks later, Opendoor acquired OS National, a national title and escrow company, in a bid to expand its title and closing operations.

“Moving into a new home should be one of the most delightful and memorable moments in life, yet the closing process gets in the way,” said Eric Wu, Opendoor co-founder and CEO. “Our goal with this acquisition is to make title and escrow feel less like a barrier in the home purchase process and more of a welcome mat at the front door of your dream home.”

Now, with the Open Listings platform fully integrated in Opendoor, which allows any buyer to self-tour any MLS-listed home using Opendoor’s app, Opendoor can now take a homebuyer all the way from finding the house, to touring the house, to buying the house, to financing the house, to closing on the house. 

And if the buyer already owns a home and wants to buy a new one, they can sell their old home to Opendoor too. Now that’s a one-stop shop.

The issue with Opendoor will be scaling its various businesses and building appropriate infrastructure in each of its markets to support those business lines.

So far, the company has been smart about how it has expanded, moving into new markets slowly. And as stated before, it seems the company raises hundreds of millions in new capital ever few months, so financial backing doesn’t appear to be an issue.

And as long as Opendoor doesn’t get too far out in front of its skis, the company has a real chance to become a dominant force in housing.

Redfin, meanwhile, is building a very similar business model to Opendoor, although Redfin started as a real estate brokerage, so it has the real estate agent structure already built in to its platform.

Redfin also had built-in title operations, but the company launched and expanded both mortgage lending and iBuying businesses in the last few years.

Redfin expanded into mortgages in 2017, starting out small in Texas only, in the Austin, Dallas, Houston and San Antonio markets.

Over the last few years, Redfin expanded its mortgage business to more than a dozen states, and is now mortgages in Florida, Maryland, Tennessee, Georgia, Illinois, Minnesota, North Carolina, Ohio, Pennsylvania, Texas, Virginia, Washington, D.C. and Colorado, with more states due to be added soon.

Redfin also touts fully digital mortgage closings that allow the company’s borrowers to sign their loan documents from any device with a camera and high speed internet connection. 

The company’s fully digital closing is conducted through Redfin’s title insurance and settlement services provider, Title Forward.

Redfin also expanded into direct homebuying in 2017, beating Zillow to the punch by a year.

Redfin began testing its direct buying program in the first quarter of 2017, which it calls “Redfin Now,” but did not make the program public until later that year.

According to Redfin, it considered Redfin Now an experiment, starting the program in the Inland Empire region of Southern California in January 2017, before expanding to San Diego in June 2017.

Redfin then announced in August 2018 that it is “deepening its investment” in its direct buying program and is planning a “long-term” expansion of the program beyond its first few markets.

loanDepot also appeared to have plans to become the mythic one-stop housing shop, even bringing on former Keller Williams CEO Chris Heller to serve as CEO of mellohome, loanDepot’s attempt to build a platform for “buying, financing, and improving homes.”

Mellohome was born from mello, loanDepot’s proprietary digital lending platform. 

The company later expanded mello to become mellohome, which connects borrowers with real estate agents and home improvement providers. loanDepot also later rolled out comprehensive digital mortgage technology under the mello umbrella.

Those moves all appeared to be made to position loanDepot as an all-encompassing housing entity, but that push appeared to hit a snag when Heller left loanDepot earlier this year to serve as the chief real estate officer at OJO Labs, a real estate technology startup whose flagship product is an AI-based conversational assistant that is currently being used in the real estate industry.

It should be noted that both Heller and loanDepot have connections to OJO.

Two years ago, loanDepot reached an agreement with OJO Labs to act as the mortgage provider of OJO. The company’s claimed that OJO’s artificial intelligence technology combined with loanDepot’s digital lending platform would allow homebuyers to access real estate and mortgage information, help them get pre-qualified and guide them through an entirely digital, mobile-first experience.

loanDepot took another hit when the company’s chief technology officer, Dominick Marchetti, left the company earlier this year.

In his role, Marchetti oversaw the development of much of loanDepot’s mello program. But Marchetti left loanDepot for Guaranteed Rate, where he is tasked with leading the company’s “product innovation agenda.”

One interesting facet of Marchetti going to Guaranteed Rate is the mortgage potential created by a recently announced partnership between Amazon itself and Realogy, the largest U.S. residential real estate brokerage.

The partnership, called TurnKey, matches potential homebuyers with real estate agents and offers up to $5,000 of Amazon products and assistance as a “Move-In Benefit” for using the service to find their real estate agent from among the Realogy brands, which include Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sotheby’s International Realty.

The partnership could prove to a massive windfall for Realogy’s real estate agents, and for Guaranteed Rate, because Guaranteed Rate and Realogy are partners in a joint venture called Guaranteed Rate Affinity that markets mortgages across the Realogy real estate companies.

And what is helping to power TurnKey on the Realogy side? OJO Labs, which recently partnered with Realogy to create a virtual assistant for real estate agents.

So, instead of loanDepot being the one to build the all-encompassing platform, maybe it will be Guaranteed Rate. 

Or maybe it will turn out that Amazon itself will be the Amazon of housing.

For years, there have been rumors that Amazon wants to get into the real estate, housing, and mortgage business.

Last year, HousingWire reported that Amazon was looking to hire a head of a new mortgage division that would have seen the company perhaps become a mortgage lender itself.

At other points, the company briefly rolled out a “Find a real estate agent” page, perhaps a precursor to the Realogy deal.

There were even rumors a few years ago that Amazon was trying to buy loanDepot outright as its entre into mortgages.

That didn’t happen, at least not yet.

So perhaps Amazon is using this Realogy deal as a trial balloon to test the housing landscape for viability. Or perhaps Amazon is quietly building a mortgage lending operation. 

Picture it now: Amazon Prime Home Loans, with exclusive discounts for Prime members.

Either way, Amazon has certainly been looking at housing and mortgage lending for quite a while. Only time will tell if Amazon itself becomes the Amazon of housing.

But if Amazon doesn’t (or doesn’t want to), there are clearly several others jockeying for that title. Whether any of them get there remains to be seen. But it certainly won’t be for lack of trying.

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