[NEWS IN FOCUS] Zigbang zigs from being a neutral market to a potential competitor
It was a bait and switch, brokers claim, by a company that had built itself up with revenue from advertising paid by the real estate agents themselves.
Ten-year-old Zigbang recently announced that it will sign deals with property agencies to split commissions equally with them for sales initiated through the site. Those signing up to cooperate and be "On-tact partners" are rewarded with 3-D photos and virtual reality tours of entire apartment complexes.
Zigbang already posts photos of available apartments on the site for real estate agents, but the service for partners will be significantly upgraded.
The company explained the new business model will contribute to a more transparent environment for property deals by eliminating false offerings and fake photos, which plague the site.
Zigbang’s new service will also help fledgling brokers who don’t have their own agencies. It guarantees 50 million won ($43,000) of profit in the first year for newcomers and provides consulting services.
Brokers are gobsmacked, saying that Zigbang will eventually hire its own brokers and squeeze others for higher fees, essentially becoming a megabroker dominating the market.
“Real estate platforms like Zigbang were able to make money from the advertising fees that brokers paid," Korea Association of Realtors wrote in a statement. "They claim co-existence with us, but with the capital and data they have, they will eventually dominate the market and make us subordinate."
Zigbang claims it has no intention of directly engaging in the brokerage business, and that it is committed to eliminating chronic issues in the business.
False offerings, false photos
“The real estate market, especially for studios, has had a bad reputation for deceiving customers with fake photos while receiving high commissions," said Lee Seul, a spokeswoman of Zigbang.
"We want to make the customers feel that their brokerage service is worth every won of the commission by elevating the service quality."
In Korea's real estate market, multiple brokers sometimes promote the same property with only vague information about it to attract customers. When customers show up, the broker says the promoted property has been just sold and takes them to other offerings.
False offerings reported to the Korea Internet Self-Governance Organization in the first quarter reached 38,857, an 18 percent increase from the first quarter of 2018.
False photos are also a major issue, where the brokers upload photos of similar but better apartments to hook potential tenants.
"To avoid such tricks, potential tenants had to physically look at at least 10 houses before making up their minds," Lee said. "It is the same for the brokers. With customers not believing the broker’s words, they have to take them to every single house they show interest in."
Properties listed on the On-tact partners system are obliged to reveal the exact apartment number and the floor to prevent such false offerings.
Zigbang also says it will help rid the market of collusion.
Apartment brokers often form groups to share information about new properties put on the market and potential tenants. If the brokers cooperate, they share commissions with each other.
“Brokers form cartels and exclude newcomers because they don't want to share the profits," Professor Kim Jin-yoo from Kyonggi University's Department of Urban Planning & Transport Engineering said. "Due to such arrangements, people who want to sell or buy houses have to rely heavily on local cartels."
Zigbang will take these groups out of the equation.
Brokers remain skeptical.
"Platform businesses in other areas such as e-commerce or food delivery that offer convenient and transparent services lead the industry to expand, generating more demand, and it is a win-win for both the customers and the business operators," said Cho Won-kyun, a spokesman for the Korea Association of Realtors.
"But for real estate, it is a different story because you don't sell or buy a house out of the blue just because a new platform makes the process easier and more transparent."
The association, which represents some 110,000 brokers in Korea, said it will take the issue to the National Assembly. It has also initiated on a signature campaign.
"Zigbang said it will guarantee 50 million won in the first year, but what it means is that they are confident about taking that much profit from the existing brokers because the pie isn't going to get bigger," Cho said.
"In the long-term, they will gradually dominate the market."
Despite such disagreements, there still is way for the two sides to work this out, Professor Kim says, as the country's unique, shady real estate ecosystem needed a shake up one day or another.
"The share ratio of the commissions can be adjusted in a way that acknowledges existing know-how and market insight," Kim said.
"Or the ratio can be more flexible by giving more to brokers who contributed more to the deal. "
BY JIN EUN-SOO [email@example.com]