Web-based Realty Firm, ZipRealty, Leads Industry
May 14, 2009
When Emeryville-based ZipRealty launched 10 years ago to provide an online platform for looking at houses without going to open houses, Bay Area real estate prices were soaring.
And while median home prices in the Bay Area have taken a hard fall during the current recession, ZipRealty, one of the first online real estate brokerages, is still growing at a time when the market is in a slump. The company is hiring agents and Web site traffic is up from a year ago.
Not only that, but it became the first online brokerage to crack a top 10 list dominated by traditional, brick-and-mortar realty firms. ZipRealty placed ninth in closed transactions and 10th for sales volume for last year, according to a survey done by www.realtrends.com., which compiled a list of the country's top 500 residential real estate brokerages for 2008.
"They have a good business model and they have capital to invest in the growth of the business," said Steve Murray, editor of Realtrends.com. "They are very dedicated, they are very focused."
ZipRealty was the only online brokerage working with buyers and sellers to make the top 10 list or the 500 for that matter, according to the survey.
As with many brokerages in the Bay Area, sales transactions are on the rise at ZipRealty as people take advantage of falling homes prices, whether the property is a foreclosure, short
sale or homes that need to lower prices to compete in today's market. While lower home prices increase sales, such transactions also result in smaller commissions and ZipRealty's most recent quarterly earnings show that.
For the first-quarter period ending March 31, completed transactions were 34 percent higher from the same period a year ago while the average revenue per transaction fell 21 percent (see breakout).
Pat Lashinsky, the company's chief executive officer, expects the company to emerge from the housing downturn in good form, just as it did from the dot-com crash of almost a decade ago. The company estimates revenues for all of 2009 to increase in the mid-single to low double digits over 2008 levels.
"We're one of the few companies I know that came around before the dot-com bomb and we survived the dot-com crash and we got through that time fine ... We continue to hire people," he said in an interview.
ZipRealty unveiled its Web site in August 1999 to serve the Bay Area. The first ZipRealty home sale happened two months later. Buyers receive a 20 percent rebate from the ZipRealty agent's commission on homes priced $100,000 or higher. On a $300,000 home, that rebate would work out to $1,800.
One of first people to make use of the site to buy a home was Mike Vergara. In February 2000, Vergara and his wife bought a three-bedroom, two-bath home in San Bruno for $450,000, a place they still live in today.
"It just seemed like a good way to find a lot of information at your fingertips as well as the (rebate). It was nice to get money back," said Vergara, director of risk management for San Jose-based online payment processor PayPal. He liked researching the homes and neighborhoods before going out to look at them. "It's more empowering to the customer to understand what is happening and therefore make a better decision," he said.
By 2000, ZipRealty had expanded to 14 other markets. It is now active in 36 markets in 22 states and the District of Columbia, a size that outpaces two other national online real estate brokers: privately-held www.redfin.com., which operates in 10 markets, and www.realestate.com., which operates in 20 markets and is part of LendingTree, which is owned by publicly held Tree.com.
ZipRealty went public in November 2004, offering shares at $13. Today, the stock price is about one fourth of that price.
Last year, the company expanded to New York, specifically Long Island, Queens, Brooklyn and the Bronx, which is proving to be a challenging market.
"I think being in New York right now is really a tough place," said Lashinsky, when asked whether he regretting moving into any markets. "It's very different than anywhere else in the country. It's been much challenging than we expected... Everywhere else, we feel we are gaining (market) share."
Still, the company's expansion plans do not match the pace of their early years. It plans to add one or two markets this year, including Portland, Oregon, which it started serving in April.
"We really have to wait and see," Lashinsky said. "We are really focusing on the markets we are in."
In addition to adding markets, ZipRealty has added features to its Web site over the years. They include e-mail notification of new listings, allowing clients to rate agents, a tool that measures buyer interest in a particular home and a walkability index for neighborhoods.
"We listen to consumers and what they are asking us about," said Lashinsky, adding that some of the site enhancements come from clients while others are developed internally.
Eve Mitchell covers residential real estate and personal finance.