The U.S. real estate industry may soon find out whether house hunters will look for homes in the place where they already shop for everything else.
Amazon.com Inc. is partnering with Realogy Holdings Corp. to funnel potential buyers to the brokerage company’s agents. Clients who go on to purchase a home will receive up to $5,000 in products and services from Amazon, giving the company a way to market things it already sells — handyman services, smart-home gadgets, furniture — to people who are likely to need them.
For Realogy, whose brands include Century 21, Coldwell Banker and Sotheby’s International Realty, the partnership lets it use Amazon’s massive audience to give it a leg up in the highly fragmented residential real estate industry. Tuesday’s announcement follows news earlier this month that brokerage Redfin Corp. is working with the SoftBank-backed start-up Opendoor in a venture that seeks to leverage web traffic to drive home sales.
The program, called TurnKey, could generate new leads for Realogy, helping the company recruit and retain agents, and allowing the brokerage to command a higher share of agent commissions, analysts at PiperJaffrey wrote in a note. “The magnitude of those benefits will depend on the amount of marketing put forward to drive awareness,” the analysts said.
Realogy shares jumped as much as 30% before giving up some of those gains. The company’s shares had retreated more than 60% this year through Monday.
The housing market has long presented a tantalizing but complex proposition to technology companies. It’s enormous — the total value of U.S. homes tops $33 trillion by one estimate — and fragmented, making it an appealing target for disruption. It’s also defined by a small number of high-value transactions, giving buyers and sellers reason to opt for personal relationships with human agents.
Early entrants, such as Zillow Group Inc. and Redfin Corp., succeeded at building large online audiences for home listings and market analysis, but ultimately wound up fitting into the existing ecosystem rather than remaking it in their own images. Lately, tech companies have used home-pricing algorithms and war chests of investor capital to build the biggest home-flipping operations the world has ever seen — proving that some Americans are willing to do the biggest transactions of their lives online.
For Amazon, the partnership is another way for the e-commerce giant to ingratiate itself with customers going through big life changes. It already entices new parents with cheap diapers, and college students with deals on books. Capturing home buyers would create a market for a range of home-improvement services as well as technology including Amazon’s Alexa-powered Echo speakers, doorbells and security cameras. As always, the overarching goal is to find new customers and lock them into the Prime membership program.
Beyond Amazon, there are other large internet businesses that could shake up an industry that has yet to be fully digitized.
“Given the fragmentation of the online real estate brokerage market, large internet firms like Amazon, Facebook and Google have an opportunity to leverage their traffic and potentially create a competing product to Zillow and Redfin,” said Andrew Eisenson, an analyst at Bloomberg Intelligence.
Yet an e-commerce site may not be the first place people will want to turn to for the biggest purchase of their lives.
“People are not on Amazon looking for houses,” real estate tech strategist Mike DelPrete said in an interview. “Imagine being in the bookstore and browsing around and having a real estate agent come up to you. It would be kind of distracting.”