By Katherine Clarke and Laura Kusisto
Real-estate brokerage giant Realogy Holdings Corp. launched a
new partnership with Amazon.com Inc. on Tuesday, a fresh attempt at
jump-starting the property firm's flagging business and tumbling
share price.
Under the new program, known as TurnKey, home buyers searching
for an agent on Amazon.com will be directed to a Realogy agent in
their market. These buyers get up to $5,000 of smart home devices
and free home services from Amazon, from unpacking and cleaning to
furniture assembly and smart home setup.
Realogy is hoping the power of the Amazon brand can energize its
own amid a prolonged slide in its stock price. The company declined
to comment on the agreement's specific financial terms but said it
is footing the bill for the home services from commissions earned
from deals that the venture with Amazon is anticipated to
generate.
"These are the kind of innovations that hopefully will let
people who follow our equity see the future potential of our
company," said Realogy's chief executive, Ryan Schneider.
Realogy has struggled as shrinking margins in the residential
brokerage industry have collided with a slowdown in the housing
market over the past year. Its market cap has sunk to around $600
million, down from a high of more than $7 billion in 2013.
The company's stock price had plummeted nearly 80% over the past
year to $5.18 through Monday's trading. But on Tuesday morning,
Realogy shares were up about 20% following news of the Amazon
deal
Realogy's share of commissions from its agents has been in
decline in part because agents are generating a larger share of
their leads from sites like Zillow. By generating leads for agents
through Amazon, Realogy will be able to keep a larger share of the
commission.
"One of the stories of the industry is how, in the past, the
brokerage used to generate most of the leads for agents," Mr.
Schneider said. "Now, the agents generate most of the leads for
themselves."
The program constitutes Amazon's first participation in a
program tied to real-estate lead generation -- through which active
home shoppers are referred to agents -- a sector dominated by
Zillow.
Zillow's Premier Agent program directs potential buyer leads to
agents who pay a fee to the company, generating hundreds of
millions in revenue each year. The program drew $898 million in
revenue for Zillow in 2018.
News of Amazon's partnership with a real-estate company is
likely to cause unease in the brokerage industry. In late 2017,
Amazon posted a "Hire a Realtor" landing page on its site -- with a
banner that read "Coming Soon" -- drawing alarm within the
industry. The page was removed soon after.
"It was like 'Oh my God, the sky is falling in.' People were
scared to death," said Steve Murray, who specializes in brokerage
mergers and acquisitions for REAL Trends.
But the e-commerce giant has said it isn't interested in selling
real estate, at least for now.
For Amazon, the deal is a way to bolster its Home Services
product, which it launched in 2014 to connect customers with vetted
local service providers like plumbers, electricians and
installation experts for smart home products such as Amazon Echo
Dot and Ring smart doorbell products.
Amazon has faced competition in that market from well-funded
startups like Thumbtack, which has raised more than $400 million in
financing from companies such as Sequoia Capital.
The TurnKey program is launching in 15 markets, including
Phoenix, Los Angeles, San Francisco, Denver and Washington. New
York isn't included in the launch. Roughly 3,000 agents across five
Realogy brands -- Better Homes and Gardens Real Estate, Century 21,
Coldwell Banker, ERA and Sotheby's International Realty -- will
participate.
For the buyer, the level of benefits -- valued between $1,000 to
$5,000 -- are calculated based on the price of the home and include
Amazon smart home devices. Only buyers of homes worth $700,000 or
more will receive $5,000 in benefits. The median price of an
existing home in the U.S. is less than $280,000, according to the
National Association of Realtors, qualifying such a buyer for the
$1,000 gift given out for home purchases of between $150,000 and
$399,000.
By joining with Amazon for home services, Realogy is forgoing
the opportunity to generate revenue from its own relationships with
homeowners by selling ancillary services or referrals to local
service providers. Some brokerages have explored such an avenue as
a remedy to declining commission revenue.
In some ways, TurnKey is the flip side of a program rolled out
earlier this year by Silicon Valley-backed rival Compass.
Compass's Concierge program targets sellers rather than buyers,
fronting them money for staging and cosmetic work, so they don't
have to dip into their own pockets.
Realogy sued Compass earlier this month, alleging that the
startup engaged in unfair and illegal tactics to gain market share,
which Compass denied.
Realogy has also faced its own share of controversy. The company
was recently named in a lawsuit filed by a group of plaintiffs in
Illinois alleging that Realogy, the National Association of
Realtors and others have conspired to keep commissions artificially
high. Realogy has said the suit has no merit.
Write to Katherine Clarke at katherine.clarke@wsj.com and Laura
Kusisto at laura.kusisto@wsj.com
(END) Dow Jones Newswires
July 23, 2019 10:44 ET (14:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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