Zillow “knows its role” in the real estate industry: Jun Choo

Zillow is finally on the other side of a nearly year-long legal battle with Compass over its Listing Access Standards, which Compass said were anticompetitive and violated federal antitrust rules.

Both companies made it through a four-day evidentiary hearing but never got to a jury trial, as Compass voluntarily dropped the lawsuit in mid-March after Zillow adjusted its rules to be more lenient, leaving room for brokers and their clients to soon market listings on its platform and others. Leaders of the New York-based brokerage have framed the portal’s decision to edit its LAS as a sea change; However, that’s not how Zillow Chief Operating Officer Jun Choo and his colleagues see it.

“We haven’t changed our position on transparency and we remain an advocate for consumers. We talk to everyone in the industry, and what we believe is best for homebuyers hasn’t changed,” he said. “I think where we want to draw the line is that we don’t make the rules, and we understand that we don’t make the rules. NAR can do that, if they want to.”

“But we want to serve agents, brokers and teams, and we want to serve them in the best possible way, which means we have to do it in accordance with the rules in place in their market,” he added. “I think we will continue to talk loudly about what we think is best, and we will continue to have standards because we have the freedom to run our business the way we want. But we will stop making up rules for the industry. We know our role, and we know the role of the MLS.”

The following conversation has been edited for length and clarity.

Inman: We’ve had a bit of phone conversations since the beginning of the year, so let’s dive in. I’d like to start our conversation with the hot topic of the moment: AI. How did you approach further integrating AI into Zillow? And how do you deal with the persistent fears that officers have about AI and whether what helps them now could replace it later?

Choo: I want to emphasize that machine learning and AI are not new. The Z estimate is built on AI. Zillow Showcase is built on computer vision. That said, we are in a transformative moment in AI. It will transform any job. But when you think about home purchases, how infrequently they happen — about once every seven years for most people — and how big the financial commitment is, consumers still need that human touch.

While I fully expect AI to transform some of the tasks, the preparation, and much of the digital experience before selling the home, there will come a time when you’ll want a trusted advisor by your side, someone who has been through this process multiple times, who knows how to ask the right questions, who will consider things you would never think of on your own, and who will give you the peace of mind of knowing that this huge decision you are making is the right one.

I think the role of agents is really going to evolve and become easier in some ways and allow them to focus more on the people side, the sales side and the customer service side of the job. That’s probably why they ended up in the first place, because who likes busy work? That’s something that agents tolerate, but we’re trying to build these agent AI tools, like the updates to Follow-Up Boss.

I think you’ll see a huge divide between the top performing agents who really know their business, who know their neighborhood, who know how to provide great customer service and use AI, and those who don’t. Agents who use AI will be more productive. Now if they do maybe 15 transactions a year, maybe they can do 30 or 45 with [AI at their side]. I think this is a great outcome for consumers because the industry is quite fragmented right now and having fewer, more productive agents means you’re likely to work with a better agent.

One thing about AI is the trust and transparency factor. People want to know enough to understand that the tool they are using is safe. Zillow often talks about trust and transparency. How does Zillow keep that up as you dive deeper into AI?

We remain true to our mission. AI doesn’t change the way we think about our customers or our products. It just gives us a tool to do our job better. But let me give you an example of how we build trust, and it’s timely.

With the launch of Zillow Pro, which will soon be available nationwide, there is a feature called My Agent. When we generate a lead for an agent and they connect, and we know they’re working together, we get that agent listed on Zillow for the home buyer. If a buyer is already working with an agent, it’s a waste of time for us to try to generate a lead and shift it to another agent. We want to make sure this is the best experience for the consumer and the agent.

We now allow agents to also create these My Agent relationships with anyone within their sphere of influence, any lead they got from another source, so that any customer in their prospect data doesn’t show up as a lead to anyone else. And honestly, that directly takes the revenue out of our business that we could be generating.

I know there’s a misconception out there where someone says we get 90 percent of the commission on Zillow Preview, which is completely false. For all of these Zillow Preview listings, a consumer may contact the listing agent free and clear, in which case that will be the listing agent’s direction.

When they click the “I’d like to schedule a tour” button, it goes to our Zillow Preferred program partners, where we charge a referral fee of approximately 35 percent if that lead turns into a transaction. But what we do is reduce our 35 percent to 25 percent and give the 10 percent that we would have made back to the broker.

So it’s the exact opposite of what some people say. I think the best way to build trust in this business is to put our money where our mouth is and do things that add value to agents and do things to show them that we are not here to make money at their expense.

Yes. Someone brought Rory Golod and Errol’s LinkedIn post to my attention [Samuelson]’s response. Clearly, there are major players in the industry that see value in the Zillow Preview. And others have criticized it, saying it will lead to more fragmentation and will be a sea change, which I know your team disagrees with. How do you take the criticism? What do you think is fair? What do you think is unfair?

We tried to build our version of a pre-market product that we believe fits Zillow’s mission to be transparent with consumers and put consumers first, while meeting the needs of home buyers and the needs of sellers, who want more options for how they want to sell their home. And by extension, [meeting the needs] of listing agents who work for them.

No one will buy your product 100 percent of the time, but the fact that so many brokers lined up in such a short time is a strong indication that we achieved the goal. As for the criticism and what’s fair and what’s not, I think it’s fair to say that throughout history we have focused more on buyers than sellers. I mean, I think that’s because our brand, the audience, is largely made up of people looking at houses.

In recent years we have focused more on salespeople. But that’s been a journey of a few years rather than 20 years, and I think it’s fair to say that we’ve come to the realization that we need to give sellers more options for selling their homes. I think Preview fits very well into a comprehensive marketing plan that an agent should present to a home seller on how to get the most exposure for their home.

We were never against the idea that sellers should have such options. I think we’ve gotten caught up in the fact that MLSs have very variable rules. In some places it’s zero days, and in other places it can be two weeks or more, and it’s been hard to get through all that. We want our product to comply with all regulations in your market.

We believe that marketing a home broadly is the best thing for a seller. So while we believe in pre-marketing homes, we don’t believe in putting homes behind a black box with limited inventory. I mean, think about how bad that is for a buyer, and there are such things as private advertising networks, and there are some homes that are sold by Compass agents. And if you don’t work with a Compass agent, you can’t see them.

All we’re trying to do is ensure that buyers, no matter which agent or agent they work with, have access to view more homes.

Email Marian McPherson