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Zillow opens floodgates for new type of investment dollars into the brand

(BUSINESS NEWS) Zillow has opened up a new way to raise funds for the massive real estate brand, allowing their growth to continue accelerating.

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Zillow says yes to new money

Zillow Group, Inc., a leading provider of real estate information to consumers and a connector between the customer and real estate professional, stated their intention to offer up to $400 million dollars in Convertible Senior Notes due 2021, subject to market and other conditions.

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In addition, Zillow Group intends to offer the initial purchaser of the Convertible Notes a 30-day option to purchase up to an additional $60 million dollar aggregate principal amount of Convertible Notes to cover over-allotments.

This move will allow the company to raise capital from institutional investors now, while at the same time providing investors with access to Class C capital stock shares of Zillow, cash, or a combination of the two at Zillow Group’s choice.

While maturing in 2021, the notes will be able to be converted at the note holder’s option during undefined “certain circumstances” at “certain periods”. Interest will be paid in arrears, semi-annually. The structure of the sale limits the purchasers to qualified institutional buyers, as defined in Rule 144A of the Securities Act.

What will Z do with the money?

The company has retained the right to determine the interest rate, conversion rate, and other terms of the Convertible Notes at the time of pricing of the offering.

With the capital raised, Zillow Group has indicated their intention to utilize a portion of the net proceeds towards their general corporate purposes, including capped call transactions related to this offering. Among these general corporate purposes, Zillow Group identified a possible repurchase of Convertible Senior Notes due 2020 of Trulia, which is a wholly owned subsidiary of the Zillow Group.

Based in Seattle, The Zillow Group contains such familiar brands as Zillow, Trulia, and StreetEasy, working directly with real estate professionals, such as agents and rental professionals, along with lenders to maximize contacts with potentially millions of customers. They also maintain a focus on maintaining real-estate service and support brands such as Mortech, dotloop, Bridge Interactive, and Retsly.

In after-hours trading, both the A and C classes of The Zillow Group stock were trading slightly lower on the announcement.

#ZillowDollarz

Roger is a Staff Writer at The Real Daily and holds two Master's degrees, one in Education Leadership and another in Leadership Studies. In his spare time away from researching leadership retention and communication styles, he loves to watch baseball, especially the Red Sox!

Real Estate Corporate

Zillow gets one step closer to practicing real estate

(CORPORATE) Real estate giant, Zillow, has been testing “Instant Offers,” today expanding to include themselves in the mix of buying and selling homes.

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For over a decade, real estate practitioners have worried that their feeding Zillow endless information would empower them to eventually pick up real estate licenses and become their largest competitor. In 2007 and 2008, it was massive blog fodder an an emotional issue for many as agents and brokers rallied against it.

Zillow has always said they will never practice real estate. Ever. They’ve maintained their position that they sell ads, not properties.

But today, the company is one step closer, as SEC filings reveal they will be testing the buying and selling of homes directly in two test markets, Phoenix and Las Vegas.

They’re not the brokers of any of the deals, and this is clearly a play to compete with Opendoor which is already valued at over $1 billion, but it is certainly another inch closer to confirming the fears that caused so many to figuratively flood the internet streets with torches and pitchforks.

The company announced today that they would be expanding their Zillow Instant Offers Program to Phoenix after testing in Vegas and Orlando last year, wherein sellers could solicit cash offers from investors.

In the new test markets, however, they’ll be participants, stating they will be “buying and selling homes with Premier Agent partners.”

Zillow stated that their Instant Offers Program is “an excellent source of seller leads for Premier Agents and brokerage partners,” given that the majority of sellers who requested an offer ended up using an agent from the program.

Fast forward to today, and they’re no longer the matchmakers, they’re also planning to buy and sell investment properties themselves.

In a statement the brand said, “Beginning this spring, home sellers in the Phoenix and Las Vegas real estate markets will be able to compare an agent’s comparative market analysis (CMS) to offers from Zillow or other investors.” Adding, “When Zillow buys a home, it will make necessary repairs and updates and list the home as quickly as possible. A local agent will represent Zillow in the purchase and sale of each home, enabling agents to earn commissions.”

All of this could be one step closer to competing in the real estate market as actual practitioners, or maybe Zillow is just as enchanted with Chip & Joanna Gaines’ house flipping as the rest of us.

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Real Estate Corporate

Zillow challenges federal antitrust allegations

(CORPORATE NEWS) Zillow says they’ll “vigorously defend” themselves against allegations that Zestimates are concealed on partner brokers’ listings.

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Earlier this week, New Jersey broker, EJ MGT LLC filed a lawsuit accusing Zillow of concealing Zestimates on specific listings, implying that paying partners are given an unfair advantage in the marketplace. The suit acknowledges that Zestimates appear somewhere on all listing pages, but alleges that only certain brokerage listings do not have the Zestimate listed prominently under the listing price.

Court documents offer screenshots of listing pages with and without Zestimates as well as documentation of communication with Zillow Group staff explaining that only “certain brokers” receive “certain treatment.”

But not so fast.

Zillow points out that Zestimates simply appear on different parts of the page for different listings.

Emily Heffter, Sr. Manager of Public Relations at Zillow Group tells The Real Daily, “despite the claim in the suit, no listings on Zillow are exempt from having a Zestimate. Some listings have the Zestimate in a different place on the page.”

The lawsuit criticizes the accuracy of Zestimates, a critique the company is quite used to and typically responds by reminding people that they are not appraisals, and not always accurate across the board (some states are non-disclosure states, for example, so home sales data flows differently depending on location).

Heffter reaffirms just that, noting that “the Zestimate is not an appraisal. It’s an estimate created by a sophisticated machine-learning process, and it’s meant to be used as a starting point in determining a home’s value. Zillow is very transparent about its accuracy, and we [sic] our median error rate is about 4.5 percent.”

Typically, in times of active litigation, Zillow and other companies refrain from commenting. Not this time.

Zillow Group’s official statement: “We believe the claims in this case are without merit. The Zestimate is intended to be a starting point for determining a home’s value, which is why we provide it, for free, on more than 100 million homes across the country. As a company, we always seek to create advertising products that add value for consumers and advertisers, and we intend to vigorously defend ourselves against this lawsuit.”

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Real Estate Corporate

Zillow sued for Zestimates violating federal Antitrust laws

(CORPORATE NEWS) Zillow being sued for Zestimates is nothing new, but they’re now being accused of concealing Zestimates on “Co-Conspirator Broker” listings, violating federal Antitrust laws.

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The latest Zillow legal troubles again surround their Zestimates; this time they are being sued for their Zestimates violating federal Antitrust laws. The company has allegedly violated and continues to violate Section 1 of the Sherman Act, 15 U.S.C. § 1 and the New Jersey Antitrust Act, N.J.S.A. 56:9-3.

Plaintiff, EJ MGT LLC, based in New Jersey, filed suit against Zillow Group Inc. and Zillow Inc. today. In a 21-point legal brief outlining their specific violations, two things become immediately clear (assuming of course there is truth in these allegations): Zillow is giving preferential treatment to preferred brokerages (labeled ‘co-conspirator Broker[s] in the lawsuit) and Zestimates are wildly inaccurate (as many have adamantly stated since Zestimates’ conception).

The first few points of the brief explain exactly what Zillow is being accused of doing: “this antitrust action arises from Zillow’s conspiracy with certain real-estate brokerage companies to selectively conceal ‘Zestimates.’ ”Zillow’s estimate of a residential property’s “fair market value” which the lawsuit states they know “to be inaccurate,” have allowed “only select brokers to conceal the display of Zestimates on their listings to the exclusion of the general public.”

The lawsuit goes on to state that “these agreements between Zillow and certain co-conspirator brokers of residential real estate restrain trade (read: the agents/brokers being allowed to conceal unwanted Zestimates, henceforth referred to as ‘Co-conspirator Brokers’) and deprive Plaintiff and the public in general of the benefits of open and robust competition in two markets: the residential real estate market and the residential real estate brokerage market.”

In essence, Zillow and the Co-conspirator Brokers have allegedly made an illegal agreement regarding the display of Zestimates on Zillow’s site.

Zillow has long touted their Zestimates as a “user-friendly format to promote transparent real-estate markets and allow people to make informed decisions;” except Zestimates are often believed to be inaccurate and now they’re allegedly being concealed for a select group of Co-conspirator Brokers – a far cry from making real estate more transparent.

If the lawsuit’s claims have any validity behind them, it seems as though Zillow may be in for a bumpy ride. Item 10 in the suit states, “Zillow has acknowledged that it conceals Zestimates as a result of agreements with only ‘certain brokers’ who receive ‘certain treatment’” and uses a message screenshot from Zillow’s Help Center as proof these words were in fact used to explain why some listings had prominent Zestimates while others did not:

You may be wondering what brought about this lawsuit; Plaintiff, EJ MGT LLC, is marketing a property located in Cresskill, New Jersey, through an agent unaffiliated with Zillow (not a “Co-Conspirator Broker”). Therefore, their listing contains a prominently displayed Zestimate, while a similar listing in nearby Alpine, New Jersey, which is listed through a “Co-conspirator Broker,” conceals the Zestimate:

The above example is not the only one outlined in the case, however. Item 12 of the lawsuit states that further evidence can be seen by comparing a residence page for a property while it was listed with a Co-conspirator Broker versus the same residence page once the property was off the market. One clearly conceals the Zestimate, while the latter displays it clearly underneath the listing price.

For reference, the Co-conspirator Broker listing was captured on December 26, 2017 and the screenshot after it was taken off the market with the Zestimate was taken on January 2, 2018. Merely a week in between images, and yet the difference of how the ad is displayed is quite apparent:

In essence, Zillow has violated the very transparency they claimed to create.

Zillow is allegedly promoting misleading and inaccurate information while using their marketing power to charge brokers to hide this information which could negatively impact a sale, and which Zillow itself has acknowledged is sometimes inaccurate.

Also, general members of the public have no way to prevent Zillow from obtaining and posting information in this way, and it cannot be altered without hiring an alleged Co-conspirator Broker, as Zillow has explicitly refused to offer the option to hide information to individual homeowners, further deepening the dependency on Co-conspirator Brokers.

Because of their alleged refusal to treat everyone equally and “empower homebuyers with information,” they have potentially restrained trade in connection with the exchange of information regarding home valuation, and offered anti-competitive benefits to only those brokers chosen to purchase that ‘special’ service package from Zillow that removes Zestimates from listings.

Therefore, brokers are not on even footing: when a seller attempts to price check; the brokers without it could be losing out to those who have the ‘special’ package and removal of Zestimates alongside listing prices.

So far, each individual Co-conspirator Broker has not been named; they have been named as a group: Sotheby’s International Realty, Inc., Coldwell Banker Real Estate LLC, Century 21 Real Estate LLC, The Corcoran Group ERA, and Weichert Realty, according to court documents. It is unlikely that any action would ever impact the brokerages, rather Zillow Group itself.

Zillow is being sued for five counts: two counts of conspiracy to restrain trade, one count of violating the New Jersey Consumer Fraud Act, one count of slander of title/product disparagement, and one count of interference with prospective economic advantage. A jury trial has been requested.

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