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6 Months : From Jun 2019 to Dec 2019
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. The company's stock price has plummeted nearly 80% over the past year to $5.18 through Monday's trading. Its market cap has sunk to around $600 million, down from a high of more than $7 billion in 2013.
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 firstname.lastname@example.org and Laura Kusisto at email@example.com
(END) Dow Jones Newswires
July 23, 2019 07:29 ET (11:29 GMT)
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