Zillow CEO Spencer Rascoff delivered the keynote address this morning at the TechNW event in Seattle, discussing the process by which the online real estate company went public and dishing on the recently approved JOBS Act.
But one of the most interesting moments in my opinion came when an audience member asked Rascoff when the traditional real estate commission structure — one that frustrates so many home buyers and sellers — will be disrupted.
Rascoff explained that Zillow really has “no skin in the commission game” when it comes to what real estate professionals get paid, comparing Zillow to information provider WebMD.
“You have as much information sometimes as the doctor, but you are still seeing the doctor because they are the expert,” he said.
Rascoff said the best real estate agents today are those who understand complex real estate transactions and are good negotiators, adding that the “door opener” agents who have “access to a secret database” are fading away.
In terms of seeing radical changes in the commission structure, Rascoff said “don’t hold your breath.”
“There are other startups that are trying to break down those agent commissions, and I think most of them will fail,” he said. “And I think those that haven’t failed yet, probably will for the reasons I just explained, but we are not one of them.”
Rascoff did not refer directly to Redfin, but the Seattle company is one of the leading online brokerage companies that’s experimenting with new ways to provide cash back to consumers during the real estate purchase process.
In fact, Redfin just today put out its own report on the effectiveness of sites such as Trulia and Zillow. See: Redfin study: Trulia and Zillow lack listings and show out-of-date information
UPDATE: Some readers in the comments asked for more context about Rascoff’s comments, so we reached out to him to get additional details. Here’s what Rascoff had to say:
In my opinion, most home shoppers select a real estate agent based on their expertise and their overall fit with the potential client more so than based on price. For evidence of this, look no further than the many companies that started out as discount brokerages but which have reduced their discount over time, in most cases to the point where their product differentiation has become the quality of their agents rather than their price point. Brokerage after brokerage that have tried to gain market share based on offering discount services have tried and failed, because consumers don’t respond to it. The real estate transaction is too infrequent, too expensive, and too emotional for people to select an agent primarily based on price. True, there are also industry forces which make it difficult to operate as a discount brokerage; but the primary reason why discount brokerages fail is because consumers don’t choose to work with their agents.