Here we go again. The real estate divisions in New York City are once again in an upheaval as Zumper quietly jumped on the bandwagon in an effort to change the way customers or prospective buyers rent out apartments. This is the second time in recent weeks in which a crisis befell the real estate rental market landscape. Before the Zumper brouhaha, StreetEasy’s decision to charge agents at brokerage firms $3 per listing, per day to advertise each rental listing was met with extreme hostility.
The result, in short, is that Zumper would change from being just a rental site to a rental site that has its own brokerage firm.
ZUMPER’S MOVE IS TO LESSEN THE HASSLE
That, exactly, is the plan for the San Francisco-based startup, which acquired New York City-based PadMapper last year. This week, it rolled out “Zumper Select,” a platform that has combined all the essential things that an apartment hunter needs to do before signing a lease on a rental. A sort of one-stop shop that promises to save you time, Zumper Select will take you through the entire rental process. The platform doesn’t charge apartment hunters (it does for landlords), and they’ll be there from the beginning. Instead of you spending countless hours you don’t have scouring listings and setting up tours of apartments, Zumper Select takes away the hassle and will do all of these things and more from start to finish, which means it will be there until you sign a lease. You’ll also be able to talk to Zumper’s staff or agents in real time and watch house listing tours on video throughout the process.
The company is also hiring its own licensed agents who will take care of the deals, as well as collect any commissions. As a result, landlords will then be able to hop on Zumper Select to advertise their listings directly to prospective renters. A statement from Zumper put it this way: “Zumper Select will provide a more seamless experience, keep renters engaged and ultimately [return] more leads on all listings for agents, property managers and landlords.”
Zumper has already raised $39.2 million from investors. The portal currently has about 65,000 rental listings throughout the five boroughs of New York, and it gets feeds not just from landlords, but also from major brokerages and directly from agents.
ZUMPER SELECT A MOVE TO MONOPOLIZE THE NEW YORK CITY RENTAL MARKET
The 70-person startup already has Select in several cities already, including Chicago, Denver, Dallas and Houston. However, Zumper Select is investing a ton of money in their New York City branch, as this is their biggest and most important market, a move that is sure to butt heads with real estate agencies who seldom welcome new platforms because they see them as direct threats to their business. Specifically, and while it hasn’t been exactly said, Zumper wants to function as a brokerage firm, and the problem with that is that it may take away business from established real estate agencies. Zumper currently has 14 staff members in the city, and for the licensed agents mentioned above, there are 6. To this date, out of 4 million nationwide, Zumper has 500,000 visits to its site each month which, while strong, can’t even begin to go head to head against Manhattan’s major rental listing source that is able to continually drive traffic to its site, which, if you haven’t yet guessed, is, of course StreetEasy.
For Zumper Select, the site has more convincing to do, as it has around 800 listings for Manhattan. The company did point out that they wouldn’t interfere with exclusive listings posted on its site, with around “98 percent of leads still going to brokers who pay to post listings.”
StreetEasy has about 30,000 rental listings on its portal that literally fell by about half after the company began charging agents.
WILL ZUMPER ALIENATE AS STREET EASY HAS?
And speaking of StreetEasy, two recent moves the company made (there are actually 3, but one is on remission) have angered brokerage houses. As Broker Pulse reported, StreetEasy’s first misstep allowed firms to purchase buyer leads in bulk from for-sale listings and then distribute them to their agents. This was called “Premier Broker” and it was met with intense backlash, but if a firm didn’t opt into the program, it eventually wouldn’t be able to compete with those who have the money to shell out. This was a concern for Douglas Elliman, and its COO, Scott Durkin, who opted into the program, said: “A lot of the brokers that work with buyers are the unsung heroes that you never read about, but there are a large group of them. We’re using [Premier Broker] to garner more leads for our agents that like to work with buyers.” The sentiment was, use them or lose. As Durkin added,
“StreetEasy is our biggest driver of traffic, other than our own site, to our listings. There was no way we were going to let that feed be interrupted. It was a smart business decision.”
But what peeved the real estate landscape even more was StreetEasy’s decision to charge agents at brokerage firms $3 per listing, per day to advertise each rental listing.
A CLEAN SLATE
THE PROBLEM IS…
One of Zumper Select’s sell is that it will be able to weed out outdated leads. “Renters are turned off by seeing the same apartment posted a dozen or more times, sometimes with differing information from different sources,” Zumper said in a statement, describing the feature as a way to verify listings are accurate and provide apartment seekers with “the best rental experience” possible.
But the problem is, StreetEasy’s $3 fee already accomplishes this. Real estate brokers have the ability to remove old, inaccurate and purchased listings. This allows for a clean slate, because agents will be quick to update rental listings that have already been rented out in order to avoid unnecessary costs.
THE LASH-OUT BEGINS
Citi Habitat was first to criticize Zumper, saying it would halt feeding open listings to the New York newcomer ASAP. As Gary Malin, the president of CitiHabiitat, said in an email, “I don’t know why you would pay a competing brokerage firm to advertise your listings and take your clients.” He also discouraged agents from sending their listings, adding, “By posting to their site, you validate their service, which given their new direction, does not make business sense. They make money in multiple ways, do you make any money from them?”
Meanwhile, Bold New York’s Jordan Sach took Zumper to task, telling the Real Deal that the company should focus on what it is good at, which is
“disseminating rental information.” As he pointed out, “Just because they have gathered a lot of rental data doesn’t mean they would be good brokers.”
A NIGHTMARE TO BROKERAGE FIRMS
The real estate division may not immediately adapt Zumper Select, but they are not without fear. That’s because Zumper is living out brokerage firms’ worst nightmare, that a real estate site will launch its own brokerage firm, slicing their business in many different ways. To put this as an example, what would happen if Zillow suddenly opened up its own real estate brokerage firm?
Havoc, of course, will result.