It was only a matter of time before the largest seller of almost anything entered the real estate market. Amazon announced it’s new program, Turnkey. This program partners with Realogy (owner of Sothebys, Coldwell Banker, etc..) to funnel potential buyers to the brokerage company’s agents. How does this change the real estate game? Why is this announcement so important?
What is Turnkey from Amazon?
Turnkey is a collaboration between Amazon and Realogy’s various brokers. Amazon will generate leads from home buyers by offering up to $5,000 in free home products that are installed by a selected contractor. The program is tiered for example if you buy a house over 700k you get the full $5,000 in products/services, whereas a house under 400k you get $1,000 (full details).
What is the strategy for Turnkey for Realogy and Amazon?
The announcement of turnkey was an interesting take on the real estate sales process. Amazon is one of the top generators of web traffic with high demographics and Realogy is looking for the same clients as prospective purchasers of real estate. Realogy is using this as a leads generator to increase sales volume.
The partnership is much more important for Realogy than Amazon.
Realogy needs to drive more sales volume to its agents. The competitive landscape in real estate is quickly evolving with Zillow offering instant offers, opendoor partnering with redfin, and various other ibuyers hitting the market. These changes are forcing traditional brokerages to partner in order to stay relevant. The benefits to Realogy were readily apparent in the market with their shares jumping 30% on the announcement while Amazon, barely budged. I think the market drastically overestimated the value of this partnership to Realogy. Unfortunately, this partnership with Amazon is basically an expensive lead generation tool for Realogy with no real value add.
The benefit to Amazon
I’m sure Realogy is paying at least Amazon’s cost on the products that it is giving away. Amazon gets to test out a new business model with very little downside risk. Once Amazon masters the offering it could easily sell these same leads to other realtors or even branch out to a redfin model where it has some inhouse realtors that can write offers substantially increasing its profit margin.
Big changes ahead for real estate
As big data gets involved from Amazon, Zillow, Redfin, OpenDoor, and countless others the winds of change will sweep through the industry. We have seen in other industries that whomever controls the data wins. A good example is Amazon. They have eliminated countless companies throughout the retail sector due to the intimate customer knowledge. The same can be said of Zillow who is now branching into buying and selling houses by utilizing its data trove.
Just as other industries have consolidated, the real estate industry is ripe for disruption. The recent partnership of Amazon and Realogy is another step towards change within the industry. The winds of change are just beginning. Look for more partnerships to emerge that will continue this trend.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all they need is their simple one page application (no upfront fees or other games).