Zillow + Trulia = Love Forever

Zillow + Trulia = Love Forever

After swirling rumors and speculation last week, it is now official: Zillow and Trulia announced this morning that they will merge.

Trulia shareholders will get 0.444 shares of Zillow stock (Z) for every share of Trulia stock (TRLA), making the deal worth $3.5 billion at today’s prices.

I’ve never been much of a fan of either company, since they aren’t really “disrupting” or improving the real estate industry so much as they are just leeching off of it. Their persistently lousy data makes either site a terrible place to try to find a home that is actually for sale, and their business model is basically to be a middle man.

Both of these companies make most of their money by selling advertising and collecting referral fees from real estate agents and mortgage providers. That is, if you can really consider consistent net losses to be “making money” at all:

Zillow-Trulia-losses

So all in all, it seems like a great match. High fives all around!

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

34 comments:

  1. 1

    I would agree with Tim’s assessment, and would ask a question I asked elsewhere. Are there parts of the country where the brokerage websites are so bad that you need these websites? I just don’t get the point. These seem to be completely useless companies that don’t do what they do terribly well.

    They really are just part of the industry that tries to sucker real estate agents (and apparently loan originators) into paying them money. The bad part of this news is that they are going to remain separate, so that presumably means the number of calls I get from their sales agents won’t be reduced.

    What I find interesting though is that let’s say you pay money to get a buyer lead from Trulia or Zillow. How do you then explain to the client that Trulia and Zillow suck so you’ll be sending them listing information from elsewhere? Or do you just set them up to get inaccurate and incomplete listing information from Trulia or Zillow?

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  2. 2
    BacktoBasic says:

    A company doesn’t provide value to buyer and seller has less values. That is reducing real estate transaction expense. At 6%, that’s too high.

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  3. 3
    Say What says:

    By Kary L. Krismer @ 1:

    I would agree with Tim’s assessment, and would ask a question I asked elsewhere. Are there parts of the country where the brokerage websites are so bad that you need these websites?

    Yes, most brokerage websites are terrible. I love Redfin but besides the Pugest Sound region, they don’t cover the rest of WA very well. I have to use Zillow.

    Also, when listing and comparing rentals, Zillow and Trulia are excellent sources and get a ton of traffic. Craigslist used to be the go-to place but the last rental listing I did I got a lot of phone calls/emails from Zillow and Trulia and ended up renting to a family that found us on Zillow.

    Tim, you may not be fond of these companies but as a Redfin share-holder, these latest acquisition sprees by Zillow (Trulia, Hotpads, StreetEasy, etc.) certainly don’t hurt Redfin’s valuation ;)

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  4. 4

    By Say What @ 3:

    By Kary L. Krismer @ 1:
    I would agree with Tim’s assessment, and would ask a question I asked elsewhere. Are there parts of the country where the brokerage websites are so bad that you need these websites?

    Yes, most brokerage websites are terrible. I love Redfin but besides the Pugest Sound region, they don’t cover the rest of WA very well. I have to use Zillow.

    Windermere, John L. Scott and Estately all have fairly good sites and should work in the entire NWMLS area, which is most of Western Washington, and parts of east of the Cascades. But do the other areas not have similar brokerage websites? I find that a bit hard to believe, unless you’re talking about a very rural area.

    Not many rentals are listed, so I can see why they wouldn’t be good for that. And Craigslist always was difficult, so I could see how they would gain a toe hold in that area.

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  5. 5
    Blurtman says:

    Tim,

    Any idea of the percentage of homes financed by variable interest rate mortgages, and trends in financing via this route?

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  6. 6
    Say What says:

    By Kary L. Krismer
    “Windermere, John L. Scott and Estately all have fairly good sites and should work in the entire NWMLS area, which is most of Western Washington, and parts of east of the Cascades. But do the other areas not have similar brokerage websites? I find that a bit hard to believe, unless you’re talking about a very rural area.”

    I’m talking east of the Cascades and not in rural areas. I used to use John L Scott and Windermere but Zillow passed them up years ago with the amount of information provided on each listing.

    – Windermere doesn’t even include price history, tax history, recent sold homes nearby, a direct link to the county assessor website, etc.

    – John L Scott does have detailed information but the UI is terrible and forces you to dig around to find it all.

    – Estately is as poor in eastern WA as Redfin is.

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  7. 7

    Thinking too small…think nationally. Zillow acquires Trulia for $3.5 Billion. That is BILLION. No local argument can justify that price. Remember…Trulia owns RealEstate.com (pretty sure about that) and I would expect the eventual conglomerate to be at that “address”.

    How much is that domain alone worth? A pretty penny, I’d think.

    Also…there is a difference between a “merger” and an “acquisition”. This is not a merger. It is an acquisition.

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  8. 8
    Say What says:

    By Ardell DellaLoggia @ 7:

    Thinking too small…think nationally. Zillow acquires Trulia for $3.5 Billion. That is BILLION. No local argument can justify that price. Remember…Trulia owns RealEstate.com (pretty sure about that) and I would expect the eventual conglomerate to be at that “address”.

    How much is that domain alone worth? A pretty penny, I’d think.

    Yep, now Zillow owns it.

    FYI, Market Leader acquired RealEstate.com for $8.25 Million cash in 2011, Trulia purchased Market Leader in 2013 for $355 Million.

    I would not be surprised if Redfin gets acquired within the next 4yrs or so.

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  9. 9
    Erik says:

    Both zillow and trulia have a great idea going. Their upside potential is huge. They need to hammer out the details regarding their data and figure out how to make a lot of money. A new CEO could take their awesome platforms and make them very successful. Maybe after the acquisition, they will make a move?

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  10. 10

    - RE: Ardell DellaLoggia @ 7 – I agree the web address could be valuable, and that’s another comparison to the Webvan/Homegrocer.com acquisition. They threw away the more valuable address!

    But as to valuation, I think it’s pretty clear the tech area is in a bit of a bubble given Uber’s valuation at something like $6B.

    RE: Say What @ 6 I said fairly good sites. None of the consumer sites are great, but it doesn’t really matter if a site provides more information about a property if you can’t find the property in the first place! Zillow and Trulia are places you might go to after locating a property to get that information–likely by typing in the property address because you’d not likely find it searching directly for listings.

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  11. 11

    RE: Kary L. Krismer @ 10

    Do you really think that there are no features of consumer sites that are better than “the mls”? That claim just seems like it is founded in defensiveness more than reality.

    Best example is searching by elementary school. For years the public sites, first Estately then Redfin, made this feature of much more value than “the mls”. The mls doesn’t even have the elementary school as a “required field”, nor does it use a geo map overlay like Estately or Redfin does in a map search.

    To say “our little secret system you can’t access is better” is getting pretty old. No way the internal technology is keeping up with what the consumer sites are doing…not by a long shot. Most of the changes have been to stroke agent and brokerage egos. That I grant you, yes, they do well and better.

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  12. 12
    wreckingbull says:

    RE: Ardell DellaLoggia @ 7 – You are putting far too much value on .com TLD names.

    This is a ‘great idea going’ the same way that Kozmo.com was a ‘great idea going’ Sure feels like March 10, 2000 to me.

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  13. 13
    Say What says:

    By Kary L. Krismer @ 10:

    - RE: Ardell DellaLoggia @ 7 – I agree the web address could be valuable, and that’s another comparison to the Webvan/Homegrocer.com acquisition. They threw away the more valuable address!

    But as to valuation, I think it’s pretty clear the tech area is in a bit of a bubble given Uber’s valuation at something like $6B.

    RE: Say What @ 6 I said fairly good sites. None of the consumer sites are great, but it doesn’t really matter if a site provides more information about a property if you can’t find the property in the first place! Zillow and Trulia are places you might go to after locating a property to get that information–likely by typing in the property address because you’d not likely find it searching directly for listings.

    This makes no sense. You can’t find the property on Zillow? What?? I’ve never had problems with it and I and many consumers avoid the local MLS now… it’s outdated and doesn’t give you all the information!

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  14. 14
    Say What says:

    By Ardell DellaLoggia @ 11:

    RE: Kary L. Krismer @ 10

    Do you really think that there are no features of consumer sites that are better than “the mls”? That claim just seems like it is founded in defensiveness more than reality.

    Best example is searching by elementary school. For years the public sites, first Estately then Redfin, made this feature of much more value than “the mls”. The mls doesn’t even have the elementary school as a “required field”, nor does it use a geo map overlay like Estately or Redfin does in a map search.

    To say “our little secret system you can’t access is better” is getting pretty old. No way the internal technology is keeping up with what the consumer sites are doing…not by a long shot. Most of the changes have been to stroke agent and brokerage egos. That I grant you, yes, they do well and better.

    Well, said, Ardell!

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  15. 15
    The Tim says:

    By Say What @ 13:

    This makes no sense. You can’t find the property on Zillow? What?? I’ve never had problems with it and I and many consumers avoid the local MLS now… it’s outdated and doesn’t give you all the information!

    Zillow may give you more information about an individual home than the local MLS website will show you, but they are missing about one in five of the homes for sale, and around a third of what they display is no longer actually on the market.

    http://www.redfin.com/about/data-quality-study
    http://www.ziprealty.com/documents/Data-Quality.pdf

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  16. 16

    By Ardell DellaLoggia @ 11:

    RE: Kary L. Krismer @ 10

    Do you really think that there are no features of consumer sites that are better than “the mls”? That claim just seems like it is founded in defensiveness more than reality.

    Best example is searching by elementary school. For years the public sites, first Estately then Redfin, made this feature of much more value than “the mls”. The mls doesn’t even have the elementary school as a “required field”, nor does it use a geo map overlay like Estately or Redfin does in a map search.

    To say “our little secret system you can’t access is better” is getting pretty old. No way the internal technology is keeping up with what the consumer sites are doing…not by a long shot. Most of the changes have been to stroke agent and brokerage egos. That I grant you, yes, they do well and better.

    I made absolutely no mention of Matrix (the NWMLS site). I was referring to broker sites like JLS, Winderemere, Estately, etc. Those are not secret.

    The reason that the NWMLS site doesn’t have school information is that they don’t want the liability if they are wrong (and many listings are wrong).

    By Say What @ 13:

    This makes no sense. You can’t find the property on Zillow? What?? I’ve never had problems with it and I and many consumers avoid the local MLS now… it’s outdated and doesn’t give you all the information!

    Well, first, how would you possibly know if you’ve had any problems with them not showing you listings? They just wouldn’t appear and you wouldn’t know about it. But in any case, yes, I’ve often searched for one of my listings by say price and zip code and not had it pop up, but searching for the address the listing will show up.

    And you don’t have access to the MLS. You have access to some broker sites and they are all different. If you’re referring to it as one site then you’re not talking about the right thing.

    Do Zillow or Trulia now allow you to search by a user defined map area, like Estately and JLS (and maybe others by now)? Or are you restricted to searching by city or zip code?

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  17. 17
    Eastsider says:

    Speaking of valuation, Amazon hasn’t been making much money in the past 20 years. Yet, it’s stock market valuation dwarfs many of its competitors (combined). I don’t know if you can call its valuation a bubble if it has been that way for decades.

    Similarly, Zillow can have very high valuation for many years to come. Redfin, at its current valuation, will probably be acquired one of these days. Most markets are eventually dominated by a very small number of BIG players. If I am to make a bet, I will put my money on Zillow rather than Redfin over long haul.

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  18. 18

    RE: Say What @ 13

    I require that all of my clients use Redfin for property search as the primary and Zillow as the secondary. BOTH are needed. Tim is correct as to Zillow HOWEVER in low inventory you will be more likely to find a house to buy that is not in the mls on Zillow, than you will on Redfin. You need to use both.

    Not a day goes by that I don’t use “the mls”, Zillow, and Redfin…all for different reasons, when speaking with clients. None of the three is in and of itself complete. Use all three plus the County Parcel viewers. Anything less is inadequate.

    The two things I get that my clients do not seem to be able to get via public sites is the mortgage history as to initial recorded amounts and the lot dimensions vs merely the overall square footage.

    P.S. to Kary…it didn’t dawn on me that you might be thinking any local brokerage site outside of Redfin was superior. That is shocking. You need to get out in the world. :)

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  19. 19

    RE: wreckingbull @ 12

    Personal bias. I am just way too happy that Pete got a $3.5 Billion Dollar buy out for his birthday. :)

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  20. 20
    Erik says:

    RE: Say What @ 13
    Consider the source. Listen to Kary if you want to learn specific laws. Listen to Ardell if you want to learn about real estate.

    I am still waiting for corndogs and mr. Peppers to come back. Christian and I want to learn real estate. I am sure most observers want the same thing. We need more smart people and less software engineers on here. The software folks and Kary get wrapped around the axle daily until Ardell straightens finally sets them straight.

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  21. 21

    By Erik @ 20:

    RE: Say What @ 13
    Consider the source. Listen to Kary if you want to learn specific laws. Listen to Ardell if you want to learn about real estate.

    Are you sure you’re not David Losh reincarnated? He used to say the exact same type of stupid things.

    Ardell’s position is that consumers should like Redfin better because she likes Redfin better. My position is that none of the sites are as good as Matrix (the NWMLS site available only to agents) because none provide the same flexibility, but that depending on what area and type of property the consumer is searching in, any one of them could be “best” for them.

    Very few of the consumer sites allow you to specify the maximum number of bedrooms. Very few of them allow you to specify that a 1.75 bath home is okay, but a 1.5 bath home isn’t. Seemingly only one of them allows you to draw a specific map area to search, which could be critical if you want to search in Ira’s Skyway area which has 3 or 4 cities and part of unincorporated King County (assuming you’re not happy with all of 98178), or want to search only on one side of a certain road. Only one I found seems to allow you to search for type of house, and that was very limited. Surprisingly, Zillow seemed to allow the fewest search parameters of the 7 sites I checked.

    On the bright side all of them found my target listing, except Estately which limits its search to city boundaries instead of postal address city.

    Anyway, there’s no technical reason I’m aware of that these sites can’t be better–they just aren’t. If one can allow you to search for 1.75 to 2.25 bathroom houses, then they call should be able to. If one of them allows you to enter specific square footage ranges, they all should be able to. They just don’t.

    Disclaimer: This mini-review is sort of like a review of software on a tech site. Like the authors of such reviews I didn’t spend a heck of a lot of time on each site so I may not be familiar with every site’s features.

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  22. 22

    By Blurtman @ 5:

    Tim,

    Any idea of the percentage of homes financed by variable interest rate mortgages, and trends in financing via this route?

    I am not seeing many ARMS at all – most folks are opting for a fixed rate program because of how low rates have been.

    The few that I have closed are typically jumbo and 10/1 ARMs.

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  23. 23
    Erik says:

    RE: Kary L. Krismer @ 21
    Don’t you EVER EVER EVER say anything negative about David Losh again! If Losh was healthy and still with us, he would come back with a fastball at your head. You should have learned from what Losh and others are trying to teach you, but you aren’t getting it. We just hope something sinks in to your pig head. I pick on people like Kilen, 3rd Generation, Clark County, and the old software engineer that rhymes with “fetching cole” that make foolish comments repeatedly. These people could very well have learning disabilities, but at least they are around to defend themselves.

    The whole time I was reading your comment, I was thinking… “Yeah, this bafoon only likes what he is use to and knows best, which is the mls.” You claim you cannot specify what to look up on other sites. That is because you don’t know how to use other sites dummy. Then at the end you mention, “oh yeah and I only skimmed over other sites.” It made me laugh at you because you just admitted you only like mls cause you know it best. That is why I call you “pig head” dum dum.

    My rant was because I haven’t learned much on here lately because a lot of the people that know real estate have moved on. We are stuck in this perpetual loop of software people that know nothing about real estate arguing about some specific ambiguous detail and nothing is gained.

    Can someone send me a link of the courses a software engineer has to take at UW? I think Tim is smart, but a lot of the commentary from other Software people makes me question the degree. I am a mechanical engineer and I don’t see other mechanical engineers or electrical engineers or even civil engineers making such illogical comments.

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  24. 24

    RE: Kary L. Krismer @ 1

    We Didn’t Need Separate Anti-virus S/W With Our O/S 15-20 Years Ago Too

    IMO, there’s simply not enough work in Seattle [America too] to even begin to fill all the jobs’ needs….so they’re inventing “make-work” jobs for the over-employment.

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  25. 25
    boater says:

    By softwarengineer @ 24:

    RE: Kary L. Krismer @ 1

    We Didn’t Need Separate Anti-virus S/W With Our O/S 15-20 Years Ago Too

    IMO, there’s simply not enough work in Seattle [America too] to even begin to fill all the jobs’ needs….so they’re inventing “make-work” jobs for the over-employment.

    Wait we didnt need anti virus before we had connected computers? I wonder why that was?

    I primarily search foe homes for sale on Redfin or the other broker sites. Zillow I use all the time to look at other houses for sale history, estimates, lot info. The nice thing about zillow is I can find all that out easy for nor not for sale properties.

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  26. 26
    SeattleJo says:

    I’m curious as to what information people find useful on Zillow or Trulia that they can’t get on Redfin.

    Redfin has always been by preferred site due to the layout, UI, and information that I find useful.

    Zillow has always seemed clunky and the extras such as home value or rental value have always been way off when I compare the houses I know well in my neighboorhood.

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  27. 27
    The Tim says:

    RE: SeattleJo @ 26 – There are only two reasons I ever use Zillow.

    1) I’m searching in an area where Redfin doesn’t exist yet.

    2) I want to see list price history or the photos for old, withdrawn (as in pulled off the market unsold) listings. ZIllow’s hit or miss on this since they don’t even have some listings at all, but Redfin has to abide by MLS rules so they can’t display it.

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  28. 28
    SeattleJo says:

    RE: Kary L. Krismer @ 21

    “Very few of the consumer sites allow you to specify the maximum number of bedrooms. Very few of them allow you to specify that a 1.75 bath home is okay, but a 1.5 bath home isn’t.”

    I once put a request into redfin for more filter options. A lot of families want 3 bedrooms upstairs. It is painful to look at every listing to see if a house meets this criteria. I was contacted by Redfin and they thought the request to have this sort of search capability was pretty unique and thus not needed. This kind of practical search options make sense to me as a user, but maybe I’m alone.

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  29. 29
    The Tim says:

    By SeattleJo @ 28:

    I once put a request into redfin for more filter options.

    I actually wrote a blog post on that exact subject while I was at Redfin. Unfortunately, Redfin will most likely not be building whatever search option you request. Here’s why.

    Power Search: If you build it, will they come?

    The results were clear: despite the daily requests we get for new features, the vast majority of users on our site rarely use the advanced search features that we already provide. In fact, only one search option was used in more than half of searches: maximum price at 61.2% of searches.

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  30. 30
    SeattleJo says:

    RE: The Tim @ 29

    Thanks Tim!

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  31. 31
    Southbound says:

    Since The Tim is pointing out the combined profitability of both companies on the chart in his post, I feel obliged to say that an acquisition/merger of the two companies would create a lot of overlap in costs that would go away.

    For instance, the combined companies have publicly committed to spending $100M in advertising this year (TV, online, etc). Not to say that would go away entirely, but even if you cut that spend just 20% (assuming no other changes), you have a net profit. This excludes any cost reductions in G&A and management positions, so there is greater cost reductions than just advertising.

    Not to say that from the consumer or agent perspective this move would be a value-add, but from a pure shareholder perspective from either company, this is a solid move.

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  32. 32
    Just do it says:

    By Southbound @ 31:

    Since The Tim is pointing out the combined profitability of both companies on the chart in his post, I feel obliged to say that an acquisition/merger of the two companies would create a lot of overlap in costs that would go away.

    For instance, the combined companies have publicly committed to spending $100M in advertising this year (TV, online, etc). Not to say that would go away entirely, but even if you cut that spend just 20% (assuming no other changes), you have a net profit. This excludes any cost reductions in G&A and management positions, so there is greater cost reductions than just advertising.

    Not to say that from the consumer or agent perspective this move would be a value-add, but from a pure shareholder perspective from either company, this is a solid move.

    ^^ That and Zillow can generate a nice profit margin and has $300+ million on it’s balance sheet and zero debt – but currently it’s focusing spending it’s $$ on advertising to increase the brand exposure.

    As a Redfin shareholder, you should be ecstatic over this valuation as Redfin gets ready for it’s IPO.

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  33. 33
    ChrisM says:

    RE: The Tim @ 29 – Hi Tim – I have requested more than once that RedFin add the magic numbers 7 and especially 8 to the “number of bedrooms” dropdown, but they’ve never responded. Any idea why adding two more fields to the dropdown is so difficult?

    Obviously I’m interested in fourplexes. I’m baffled as to why RedFin wouldn’t support that…

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  34. 34
    ChrisM says:

    RE: Kary L. Krismer @ 1 – “Are there parts of the country where the brokerage websites are so bad that you need these websites? ”

    Try searching for houses in Sequim, Washington. Then try Seaside Oregon. I seem to recall Hawaii also had major problems. I’m pretty sure I also had bad experiences in NH/VT/IA/ID/MO.

    Searching for properties in small MLS areas really sucks.

    While I agree it isn’t complicated to set up a proper search support, obviously it does have the “benefit” of ensuring a real estate agent be involved for the buyer given sufficient website suckitude.

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