Silicon Valley once thought it could replace the old-fashioned Realtor, touring would-be buyers around town in a well-worn Mercedes, with online agents working remotely for cut-rate commissions. It hasn’t worked out that way.
ZipRealty and privately held Redfin, two firms slugging it out in the online realty business, are posting some better numbers recently. But both have had to change their business models radically, making them look a lot more like the traditional real estate agencies they once hoped to put out of business.
The first of the dot-home contenders was Zip, which was launched in 1999 with funding from Benchmark Capital, one of the early backers of eBay. Zip, like Redfin, is a discount broker, meaning it shares some of its sales commissions with its clients. This is a different business from that of real estate search sites, such as Zillow.com, Yahoo Real Estate, and MSN Real Estate, which list homes for sale and sell advertising on their sites but don’t actually try to handle the sale.
How the Rebates Work
On a typical $200,000 house, Zip earns a $6,000 commission from the seller and rebates $1,200 of that to the buyer. The concept holds some appeal in these budget-conscious times. “We had to break a lease, so the idea we’d get some money back was definitely an incentive,” says Georgi Heltz, a 30-year-old social worker who recently bought a townhouse in suburban Los Angeles through Zip.
Last year, one in which home sales nationwide were down 13 percent, Zip sold 17,100 houses, a 23 percent increase over 2007. In February traffic to its Web site was up 74 percent, year over year, to 1.8 million monthly visitors, according to Web tracking firm comScore. That puts it ahead of sites run by much larger brokers, such as RE/MAX and Century 21, but below the…