You’ve heard the saying, “Don’t bite the hand that feeds,” right? Listing giant Zillow ignored the saying with a recent announcement that they are going to buy and sell real estate thus getting into online home sales. Have they lost their minds? Maybe or maybe not, I guess that time will tell! Zillow will now compete with the very people who buy advertising on Zillow. Do they really think that the 1.3 million members of the National Association of Realtors are going to continue to pay big bucks to advertise homes on a site that is now in direct competition with them for listings?

Zillow made its original entry into the real estate industry about a year ago with “Zillow Instant Offers.” This program, which facilitated cash offers from investors to homeowners, was tested in Las Vegas and Orlando. There was a bit of push back when this initial program launched, I suspect there will be even more this time.

So, how does Zillow’s expanded online home sales program work? They will be buying homes directly from homeowners and then reselling them. Zillow says it will make necessary repairs and updates to homes and list them quickly. Zillow plans to use local “premier” REALTORS to represent Zillow in the purchase and sale of each home and these agents will receive commission. How to become a premier REALTOR with Zillow and how commission will work was not disclosed at this time. Zillow’s program will be tested in Las Vegas and Phoenix this Spring (i.e. now).

Now, I’m not sure what percentage of people in Las Vegas and Phoenix use an agent in their new home search, but in the Atlanta market, ViaSearch research shows that 80 percent of those shopping for a home (new and resale) use an agent. John Hunt, Owner and Principal with ViaSearch states, “A lot of people in the industry are under the impression that agents are becoming less necessary as the internet has become more important in the home buying process. The reality is that the number of people using an agent to help facilitate a home buying transaction has not gone down over time, in fact, it has gone up. The agent use percentage 10 years ago hovered around 60 percent and today it is 80 percent in the Atlanta metro area.” He continues, “Zillow appears to understand the importance of having a local agent involved. But it is a slippery slope, as they could always cut out the Local REALTOR at any time. But then again, maybe they have just finally succumbed to the inevitable conclusion that all real estate is local, and will continue to be controlled by LOCAL agents and brokers!”

Kimberly Mackey of New Homes Solutions Consulting comments, “As someone who is frequently called upon when Wall Street analysts need anecdotal and more real time data than what economists’ reports will show about the home building and real estate industry, I am often asked, ‘When will the traditional model of a real estate agent become irrelevant?’ My answer is always the same; the role of the real estate agent today is enhanced by technology and the internet, not replaced by it. All the information needed to find/buy a home is readily available online; however, the use of real estate agents is rising. The reason for that is simple. In this fast paced and information overloaded world, what we really want is a trusted advisor, with whom we have a great relationship, to hold our hand literally and figuratively through what can be the most stressful and largest purchase most of us will ever make. In short, the computer can’t hold your hand. It can’t dry away your happy tears when you find the home of your dreams, and it won’t be there at the closing table to help you. The reason people continue to use and want a real live person is about the relationship, not the information.”

This new business model represents a major change for Zillow which has been viewed as a media company that simply sold ads. Buying and selling homes makes Zillow a real estate company. Arik Prawer, formerly with Invitation Homes, will serve as chief business development officer for the new Instant Offers marketplace.

Other companies that are buying and selling homes online include Knock, Opendoor, OfferPad and Refin. Some of these companies use real estate agents and some don’t. And, Redfin even offers Redfin Mortgage.

So did Zillow screw the pooch? Will Realtors continue to feed dollars to a company that is now competing with them for listings and sales? Are online home sales the new normal? What do you think?