Home Sweet Deal How is ZipRealty closing so many sales? Killer discounts and user-friendly agents.
(Business 2.0) – What's not to loathe about the routine of buying a house? The cloying agent who wants to show you more houses you can't afford? The fat commissions and closing costs? The ceaseless, tedious signing of paperwork?
ZipRealty is proving that if you can knock out just two of those three--let's face it, paper transactions aren't going away anytime soon--you can make a pretty decent run at the $1.5 trillion residential real estate business. The five-year-old company, based in Emeryville, Calif., has closed more than $3.5 billion worth of property deals in 12 markets around the United States. Zip pulled in $33.8 million in revenue in 2003--almost double what it made in 2002--and posted two profitable quarters along the way. In May, it filed for a $69 million IPO.
So what's the formula allowing Zip to nip at the heels of big brokerages? It starts with a website stocked with enough listings, maps, and comps to draw in the do-it-yourself home buyer. Then come the tantalizing discounts: Zip promises buyers it represents a 20 percent rebate on the broker's commission, and sellers who list with Zip pay a commission of about 5 percent instead of the usual 6.
But the true secret behind this "online" brokerage is the offline army of agents--600 so far--who work out of their homes, keeping Zip's operational costs close to, well, zip. Because the agents don't have to drum up their own client leads, they're trained to focus more on service than sales--and Zip pockets a bigger share of the commission revenue: 53 cents on the dollar, compared with 28 cents for a traditional brokerage.
Says Steve Murray, editor of industry newsletter "Real Trends," "Their website is better than everyone else's, they know what kind of people to hire as agents, and they are seeing great growth because of it." Here's how one recent Zip listing in Los Angeles--assuming it sold for its $830,000 asking price--left everyone at the table happy. -- MICHAEL V. COPELAND