After acquiring Homesnap in 2020 and Homes.com in 2021, CoStar Group is closing 2022 with more headline-making announcements: the relaunch of a new and improved Homes.com and the return of David Mele—who led the portal for seven years prior to the acquisition—to the helm. This news was accompanied by an eyebrow-raising subtext, however—more than 100 CoStar employees were laid off as Homesnap and Homes.com further integrated.
During RISMedia’s annual Power Broker Reception & Dinner in Orlando, Florida, on November 11, CoStar Founder & CEO Andy Florance took the stage with RISMedia President & CEO John Featherston. During their conversation, Florance delineated CoStar’s current gameplan while striving to assuage the crowd’s concerns over the data giant’s intentions in the residential real estate space. “I do hope you guys will give me a break, and by the time I’ve been doing this for 50 or 60 years, you will stop asking me if we’re going to compete with the REALTORS®,” he riffed.
RISMedia connected with Florance again to dive further into the details of the company’s latest announcements, and what it ultimately means for real estate professionals.
The Integration: What’s Going, What’s Staying
According to Florance, the further integration of Homes.com and Homesnap boils down to a better, more transparent experience for consumers and agents, an elimination of less-than-optimal features and redundancies, and better access to tools for real estate professionals.
According to Florance, the new Homes.com will more effectively market homes for sale. “I’m a big believer in the value of a portal where the home shopper is coming with the intention of trying to find a new home,” he says. “That’s the most meaningful place for a REALTORⓇ to market a property.”
While many platforms focus on marketing homes for sale via social media and apps like Waze, Florance believes this is ineffective.
“People driving a kid to a birthday party aren’t usually in high-intent home-shopping mode. We believe the No. 1 vehicle to market a property is in a dedicated real estate portal,” he says. “We’re shifting a little bit of focus away from the social media stuff that was big for Homesnap and moving more toward an emphasis on the Homes.com model,” says Florance. “We do believe in social media and retargeting, but only after a potential homebuyer has engaged and shown interest in a particular property.”
While the focus will shift away from Homesnap’s social media features, its highly popular professional tools will remain available through Homes.com, and be branded as HomesPro. According to Florance, agents can enter their Homesnap login at Homes.com and be brought to a professional version of the site where the tools are available. The HomesPro tools allow agents to message other agents, monitor other agents’ historical behaviors with listings, reveal the on-market time of properties, provide showing instructions, mobile access to the MLS, insight tools and more.
“I think back to the fifth grade and my math classes,” says Florance. “We had weekly quizzes and the teacher would take them out of the teacher’s textbook, (which) had all the good answers. I’d always want my very own teacher’s textbook so I’d know what all the quizzes were. HomesPro is like the teacher’s textbook.”
The Layoffs: Part of a Bigger Gameplan
Given the barrage of headlines over the past year about layoffs in the tech and mortgage sectors, CoStar’s release of 100 employees understandably raised eyebrows. But according to Florance, the move is not about cutting back, but rather, removing redundancies.
“It’s natural that when you pick up two companies providing real estate portals, you have to put them together,” he says. “You don’t want two marketing departments, two PR departments, two receptionists…there’s a natural consolidation.”
Despite this reduction in staff, Florance says the company is actually in “a dramatic growth phase.”
“We hired 87 people yesterday (at press time) for residential, and then we let go of 100 people,” he explains. “We’re probably hiring 800 people this year for residential, but in different roles and in different functions. We’re consistently moving forward—we’re just doing it efficiently. You don’t want to write the same software multiple times. You can’t succeed doing that.”
But Florance understands that the optics paint a different picture. “In this season of layoffs in the tech world and in real estate, it looks like something different,” he says. “But we are definitely longer term players. The average CEO is a CEO for three years. I’ve been doing it for 30. So we think longer term.”
The New Homes.com: Welcome to an Open Platform
As Florance discussed at the Power Broker Dinner, the news Homes.com is designed to create transparency and efficiency—no more “walled gardens” but an open-platform approach.
“Any agent can work with any home seller or buyer on our platform,” he explains. “We’re not trying to sell agents who are willing to split 30-something percent of their commission with us. We will focus on collaborating with real estate agents. Everyone else is trying to sell their agent and we’re more about any agent.”
Florance stresses that powering the new Homes.com required a very large investment in order to populate the site with an abundance of neighborhood content, school content, park content and agent information. The massive effort will be ongoing with major releases made quarterly over the next two years, and general brand marketing for Homes.com starting full force in March 2023.
“In the early to middle part of the year, we’re going to broadly increase marketing and unaided awareness of Homes.com as a destination,” says Florance.
Florance is confident that the relaunch of Homes.com will be highly successful, given that some 2,000 agents who demoed the revamped platform at the National Association of REALTORS®’ (NAR) convention gave it an average score of 9.6 out of 10.
“We’re hoping that broad consumer marketing for Homes.com and agent-to-agent chatter drives awareness of the opportunity,” he says.
For those who didn’t demo the site at the NAR booth, we asked Florance to highlight the biggest changes to the current iteration of Homes.com.
Truly “your listing, your lead.” Instead of the former “contact agent” feature, which generated leads to buyer agents, the new Homes.com simply features the agent’s name and contact information on the listing—a change that cost the company $40 million in revenue, by the way. The new site features the agent’s photo, bio, videos and, most importantly, their track record. Buyers can now search for the agents who have proven success in the neighborhood they’re interested in, for the type of home and price range they desire.
“We’ve built out the most comprehensive directory of every agent in the industry, and we’ve proactively researched the 200,000 agents that we believe did $100,000 or more in revenue last year,” says Florance. ” actually see the real people who do the real deals in those markets. They can collaborate with that agent online, and as the homebuyer is favoriting properties, the agent can see what they favorited on our portal.”
The new Homes.com also enables agents to send recommended listings to buyers through the portal itself, a significant departure from the outdated listing PDFs agents are accustomed to sending. “It looks pretty bad and the agents complain that it goes into a dark hole—they can’t see how the homebuyer reacted to it,” Florance explains. “We’ve made that visible so that when they send it to the homebuyer, the recommendations from the agent show up on the home screen and the homebuyer can say yes or no to each one, and the agent gets immediate feedback. Those are changes to facilitate collaboration between agents and homebuyers/home sellers.”
More speed. With vast experience in the development of performant websites, Florance zeroed in on improving the speed of Homes.com. “Fast is important,” he says, and therefore, Homes.com is moving from a 1,400 millisecond response time to running on a 200 millisecond response time. “It’s a subtle thing, but it’s important,” says Florance.
‘A bunch of honey.’ The importance of photography cannot be over emphasized when it comes to marketing homes for sale, and the new Homes.com promises to “dramatically improve” image quality. A quick stroll through the site confirms that promise. What’s more, enhanced listing imagery goes hand in hand with a trove of new, proprietary content, providing detailed information on neighborhoods, schools, parks, buildings, etc., thanks to a team of about 1,000 who are collecting this information as well as CoStar’s vast stockpiles of commercial real estate data.
“We already know where the CVSs are, where the Whole Foods are, so we’re putting that into the product,” says Florance. “A homebuyer can look at a house and see that, oh by the way, there’s a Whole Foods one block away. That doesn’t come in the MLS, this additional value to the homebuyer. Let’s just call it a bunch of honey to stick homebuyers to a site that’s agent friendly.”
Transparent valuations. During focus groups with agents, homebuyers and sellers conducted across the country, Florance and his team made an interesting discovery: People really dislike Zestimates. Or, says Florance, “any sort of single value on a property because they feel betrayed by it. They’ve learned that it’s not real.”
While agents have long lamented the inaccuracy of Zestimate and its kind, homebuyers are now also aware of its fallibility, with the failure of Zillow Offers serving as proof. That’s why it was imperative for Homes.com to offer something better—something real. Prospective buyers will now be shown three different home values from reputable sources, those used by banks for issuing a mortgage, for example. According to Florance, by revealing these three different values, consumers can clearly see that machine-learning numbers are indeed all over the map, which ultimately benefits the real estate professional.
“What I love is that one model will say the home is worth $900K, another $650K, and another $525K,” says Florance. “Then the agent comes in and says, ‘I’m selling the house for 625’ and all the lines converge on the agent’s number. The most important input to all these automated models is the agent’s pricing. What it shows is that the king has no clothes. For the data scientists out in California, the No. 1 predictor of home price for them is what the agent says it is.”
The Changing Market: Solutions for the shift
As Florance explains, the relaunch of Homes.com, with all of its new attributes and intents, is perfectly timed for a market that will only become increasingly competitive. Effectively marketing a listing will be more important than ever.
“If you bought your house or refinanced your house with 2.5% money last year, you can’t afford to sell your house,” explains Florance. “Tens of millions of Americans now own homes that they financed below 3%, and it’s irrational for them to sell that home now. At the same time, affordability, for the first time in a long, long time, has gotten to the place where it takes 26% of your income to buy a home. So people can’t afford to sell a home, people can’t afford to buy a home. The market’s frozen and shifting to a buyer’s market; but that shifts from a place where a homeowner could expect to have 25 people come by for the first open house and have 10 offers ; now, they might see 25 people in six months. So now we shift to needing to market homes, which is exactly what our products do.”
According to Florance, the need to draw more interest to homes for sale will be part of the future of real estate sales for some time to come, as we move from 6.5 million home sales down to a predicted 4.7 million annualized.
“People are biased to thinking that what happened the past two years is normal, and it’s not,” says Florance. “We’re gonna get back to reality. REALTORSⓇ will still need to generate listing leads and buyer leads, but homeowners are going to want their agent to have access to tools that drive more interest in their home in a tighter market.”
But Florance has seen a lot. And that experience keeps him calm and confident amid current market challenges.
“I’ve been operating the company since 1986 and have been through several cycles,” he explains. “We find that economic cycles create opportunities. People reevaluate how they do things. People think differently, they consider new ways of doing things and they’re more open minded, because they have to be.
“This too shall pass.”