Above: Andy Florance and John Featherston
Photo Credit: AJ Canaria
Against a backdrop of industry disquiet over foundational changes to residential real estate post-mandate, CoStar Founder & CEO Andy Florance took the stage at RISMedia’s 36th Annual CEO & Leadership Exchange earlier this month for a one-on-one conversation with RISMedia Founder & CEO John Featherston to discuss the role portals can and should play at this pivotal moment in the industry’s history.
As real estate professionals move forward on a new playing field littered with continued uncertainty, Florance said that the most important overall objective for real estate portals should be to “do no evil.”
“In this environment where the world’s a little more sensitive and things are shaking out—and I think there could be other shoes to fall—it’s probably good that the portals are doing no wrong or doing no evil,” he told the crowd of more than 400 real estate leaders who gathered at the Mayflower Hotel in Washington, D.C., for the first major industry gathering after the Aug. 17 rule changes went into effect.
What Florance predominantly finds “wrong” with most real estate portals are their lead-diversion tactics: consumers click on a listing expecting to deal with the agent associated with the listing only to be farmed out to unknown agents who have paid a premium to receive leads.
Florance said consumers are “loud and clear” about the negative experience this creates, and referred to lead-diversion strategies as “the bad internet.”
“Who in the world decided that the lead should be stripped?” he said. “That’s the bad internet. The sellers hate it. The sellers want that person they trusted to be the first one to try to do the best job selling the house. It has nothing to do with buyer agency. Buyer agency still thrives in an environment where the seller’s trusted agent answers the first call.”
According to Florance, lead diversion is particularly pernicious at this time in history, when the perception of residential real estate has been tarnished by the commission lawsuits.
“I almost think it creates a little bit of reputational damage to the industry because (portals are) the entryway to the industry,” he said. “One hundred percent of buyers and sellers engage with real estate through these portals, and that’s their impression of the industry. So it’s important that that impression is professional and is harmonious with the interest of all the parties involved.”
Florance also lamented the fact that lead diversion strips listing agents, and their brokerages, of critical branding. “People wouldn’t voluntarily say, ‘take my name off my listings,'” he said. “How many of us, when you’re sending a mailer out of a new listing, take your name off the postcard and put Zillow’s name on it? How many of you would put a sign up and then put your competitor’s name on your listing sign? It’s irrational.”
Instead, Florance asserted, the industry should be migrating to “the good internet,” where portals focus on marketing the property “not selling dodgy buyer agency leads.”
“The traditional models are not trying to sell the house. They’re trying to get a buyer agency lead, and that’s not serving the seller,” he said.
Florance juxtaposed the current lead diversion models with the approach taken by CoStar-owned Homes.com, which focuses on increased exposure for client listings, in-depth neighborhood content and retargeting through major media outlets such as CNN, ESPN and the New York Times.
“Our agents across the board are winning about 50% more listings than their competitors,” he reported. “They’re winning a higher rate of these listings because they’re offering something of value to the seller. So I think it’s the good internet, and I think it builds brand for the brokers.”
In the traditional portal arena, Florance believes brand identity has been stolen.
“In the residential real estate industry, the internet is obviously the most important marketing vehicle,” he said. “The number of times the name of a brand has been stripped off is literally in the trillions over the last 10 years. To have the internet neutering the brands is nuts. It should be enhancing the brand.”
Florance pointed to Keller Williams as an example of how brand is emphasized through the Homes.com model, reporting that the Keller Williams logo has been shown 45 billion times so far, over the course of 2024. “That includes not just on our site, but as we follow people on the New York Times, CNN or ESPN. It’s across the whole spectrum.”
According to Florance, Homes.com is utilizing the internet the way it was intended to be—as a marketing vehicle. “Every listing that you are marketing on Homes.com, you’re not being erased from your listing so that the marketing that you’re getting, brand awareness, et cetera, all follows you throughout the process.”
Featherston asked Florance to share his best advice for moving forward in this new environment. Listings, he responded, are the safest bet for the future.
“I think listings have always been the high ground because you have an 85% chance that the listing will close, and the listing tends to generate multiplier business because your name’s out there. So it’s about listings,” he said, adding that marketing listings also generates a lot of leads for buyer agents.
Florance even went so far as to say that the focus on the listing agent puts Homes.com in a completely different arena than the other portals. “In many ways, we don’t compete against Realtor.com® and Zillow,” he said. “They’re selling buyer agency leads as their primary thing. We’re not. We’re actually selling marketing tools for agents to win more listing presentations.”
Keeping an eye on further litigation
Taking the future legal landscape into consideration, Florance emphasized the value of the Homes.com model in the face of potential further litigation against the real estate industry.
“I think we have to be thoughtful about the other shoe dropping here,” he said. “Obviously, we’ve had this settlement, which was driven by plaintiff attorneys. But the government is still very focused, subpoenaing people, looking at things. A lot of things that happen make the industry a target. So we’ve just taken a hit at some level, who knows how much, on the buyer agency side, and I worry about taking a hit on the seller agency side next.”
Florance pointed to the National Association of REALTORS®’ no-commingling rule, which allows MLSs to prohibit brokers from displaying non-MLS listings with MLS listings, as an area of concern.
“If you think about the net effect of no-commingling rules on the portals, it is effectively creating a barrier—the only way you can do business with Zillow, Realtor.com and Homes.com is if you go through an MLS, effectively. So I think the government’s looking at the no-commingling rule as effectively using the market power of all the portals together to require entry through the MLS rules. At dinner parties, I’ve heard people who seem to be highly motivated about this issue.”
This warning, Florance added, is based on first-hand experience.
“I know as much about antitrust as anybody,” he said. “I’ve been hauled over by the FTC a number of times. I’ve been taken down to their dungeon, whipped and beaten, and I’ve spent a hundred million in legal fees with antitrust.”
The right path forward? As many echoed throughout the two-and-a-half day CEO & Leadership Exchange, focus on value creation, Florance advised.
“I think we’re in a great spot where the internet has not delivered value to residential real estate the way it should to date,” he said. “And I believe it will deliver a lot of value. But I think we have to steer clear, insist that we steer clear, of these controversial things, because man…if we take it on the buyer side and then the seller side, that’s just not cool.”
