It’s no secret inventory is a problem in many real estate markets across the country (my own backyard, Seattle, certainly falls in that list).
That begs the question, how do you open up more inventory for purchase?
I’ve long been a fan of the Make Me Move, and the prospect of connecting buyers and seller directly. I know virtually every home is available to buy, for the right price. I was always a fan of what Bryan was working on with Everyhome. Remzy (current Geek Estate sponsor) is following a similar path facilitating conversations/inquiries between owners of off market homes and buyers/agents.
Zillow’s Instant Offers pilot (see Inman story here) takes home owners way way beyond the “I’m willing to have a conversation” stage associated with Make Me Move, and much much closer to “I’m willing to sell my house NOW for X” that Opendoor, Knock, and others are having with sellers (modern versions of “webuymyuglyhouse.com”).
In 2014, I wrote this prediction for Opendoor (prior to specific details of their model being public):
The use case will be home owners come to the site, submit their home details, and receive bids back from real estate investors. They will select a bid, and then be given an option to close online with the investor of their choice (lots of work behind the scenes to allow that to happen). I don’t know the investing space that well, but from my understanding, the majority of investors have a very specific formula they follow — and if any home & price combo fits their formula they will buy the house no questions asked because they know they can flip it for more than that (if that assumption is not the case, please leave a comment).
Once they have early critical mass of investors submitting bids, they will open it up to individual buyers who want to bid on homes (maybe w/ the help of their agent).
Looks like this playbook is going to play out with Zillow, too.
Start with connecting owners with investors (15 institutional investors are part of the pilot in Las Vegas and Orlando) who are guaranteed to have cash to execute a transaction with a willing home owner.
Over time, connect qualified buyers with qualified sellers directly. There are certainly individual buyers already buying properties with all cash who would use such a service. Agents can, and likely will, still be part of the process — but in a lesser capacity.
In my mind, there is no way this remains an offering only for institutional investors. That’s a niche, and Zillow has a history of big BIG bets. Remember, there’s no more free lunch. What most real estate startups can only dream of (because they can’t afford it), Zillow can do in a day.
The “a la cart” model that has been tried so, so, so many times over the past ten years may actually now be possible with Zillow’s massive reach and strong consumer brand. When writing about Golden Key (one such attempt) in February, I said the two questions were:
How do you reach consumers and win their trust? People use their friends (who are agents), because they already trust those people. Trust takes years and years to build (ask Redfin).
Do the incentives line up for those doing the work? Ie do they make enough money to make it worth their while?
To question number 1 — I think Zillow is trusted by home owners far and wide. Trust is obviously a focus, it’s right there in their mission statement — “Build the largest, most trusted and vibrant home-related marketplace in the world.”
Related to question 2 — you know what? It’s quite possible that the “super agents” Zillow’s courting for Premiere Agent would actually make MORE with the new model than the current model. Obviously, that’s not proven but it is possible depending on the specifics of the work and the corresponding commission percentages. Customer acquisition costs/time is more often than not the barrier to growing a real estate business — many super agents could handle more business (or scale their existing teams), and be more efficient in the process, than they are today. If they didn’t have to worry about user acquisition at all.
A win for super agents. A win for Zillow. A win for owners, buyers and sellers. Not a win for the bottom 80% of the industry (or NAR and local associations which count on member dues to operate).
I think the big question is — is timing right?