CoStar Group announced last Sunday that it will buy Homesnap, an app and technology provider for residential real estate agents, for $250 million, the Wall Street Journal reported.
And just like that, the tilt of Zillow’s trajectory changed overnight.
The acquisition would mark CoStar’s first major step into the single-family-home market, which dwarfs the size of the commercial real estate market. CoStar bills itself as the world’s largest provider of commercial real estate information and analysis.
CoStar CEO Andrew Florance
By merging, CoStar and Homesnap would expand each others’ reach, said Andrew Florance, CoStar’s founder and CEO.
“I would say that 50 percent of our broker clients do some residential and, of the top 100 residential firms, 80 percent do some commercial,” he said. “So we would think these tools as they come together would be pretty powerful.”
About 300,000 residential agents use the company’s app to manage and analyze their listings and others.
CoStar Now Has Arsenal to Take on Zillow
With a $35 billion valuation and Homesnap now in its arsenal, CoStar Group is arguably the only company with the resources to face off against Zillow in the residential search space.
As Inman founder Brad Inman pointed out in a prescient piece published nearly three weeks before news of the Homesnap acquisition was made public, the company and Florance, its chief executive, have a reputation on Wall Street for getting the job done.
In this case, Inman was speculating about a merger with CoreLogic: “Such a merger worries Zillow because CoStar is a good executor,” Brad Inman wrote back on Nov. 2, going on to note that the profitable CoStar currently sits on a $6 billion cash reserve. “Look at its rental property, Apartments.com, which has already outpaced Zillow Rentals on revenue and the size of its inventory.”
Differences in Business Model
But to hear it from Florance himself, CoStar might be inching into Zillow’s space, but it most definitely doesn’t intend to emulate its business model. In an exclusive interview with Inman, in fact, he pulled no punches when discussing the dominant residential search portal’s Premier Agent feature.
“I think it’s a bad consumer experience because the consumers get confused as to who actually has the listing,” Florence said of Premier Agent. It “takes money out of the pocket of people who actually have the listing. It just feels disingenuous.”
Regardless of what form Homesnap takes in 2021, Zillow and its CEO Rich Barton will be on high alert.
The all-cash acquisition is expected to close later this year.