Zillow Instant Offers…Finally
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?
Seth SieglerPosted at 16:54h, 22 May
One of the biggest problems that is rarely discussed is that there are a lot of people out there who are afraid to put their house on the market because they don’t know if a suitable “next house” will be available during the exact time that their listing goes under contract. It’s an insanely nebulous way to sell and buy the largest and most important asset that most people own. It would also exist in the auto industry but it was solved by the concept of the trade-in. That turns the tables and allows people to find their “next” first and then decide to sell on their own timeframe. There is a cost for convenience but millions of people trade their cars in every month, knowing they get a little bit less in exchange for being able to sell their car only after identifying their next one.
This is pretty big news and a really interesting endorsement for this up and coming model
That being said, this doesn’t have to be a “without agents” sort of thing. I’m not sure why everyone is jumping to that. With a new model, there seems to be lots of places where the agent’s expertise could fit in. It might just be a different process. It doesn’t have to be one without agents though.
Drew MeyersPosted at 17:05h, 22 May
The trade in model is an interesting one indeed. That’s certainly part of what opendoor is doing…buying at a discount from sellers who have to move now, and willing to take a financial hit for speed/peace of mind.
Agree — I don’t think this will result in “no agents”. But it could change the buyer/seller/agent dynamic and finances considerably.
Jon KolskyPosted at 12:57h, 16 June
Drew, I see things differently. And let me just start with your last paragraph. First, it is not a win for super agents. And I can only speak about the ones in my area, but most of the top super agents that I know of in my area don’t pay Zillow for leads. There was one super agent in my area that tried and spent thousands of dollars with Z last year, I just talked to her about Z and this is what she told me. She reduced her impressions to a minimum because the leads (in her words) are worthless. The only reason she is paying for a few monthly impressions is so that she can keep other paying agents impressions off her featured listings. She went from paying thousands a month to only spending a couple of hundred dollars a month. (I think her experience is a typical Z experience.) So I think in the long run, selling worthless leads will eventually catch up and eventually haunt Z and their investors!
A win for owners and buyers? Lol… We are on two different sides of the planet. Most sellers can’t stand Z and curse them for unfairly and for without permission setting a value on their homes (better known as the Zestimate.) Not only is the placed Zestimate inaccurate but it also potentially violates the homeowners legal “right to seclusion.” And for buyers, little do they know that there are a lot of homes for sale that “actually” are not listed on Z, and would-be buyers also have no clue that a lot of the listing data is inaccurate and there are homes listed for sale when in fact they are not for sale. Example, Zillow pre-foreclosure listings. The pre-foreclosure are very misleading on Z. Anytime a homeowner misses a payment on his or her mortgage; the lender sends a notice to the owner, and of course, it gets tracked by Realty Trac. Once the notice gets sent, Zillow then takes this information and lists the home in pre-foreclosure status on their site from the data provided to them by Realty Trac. Zillow even goes so far as to add an image and identifying details about the property. Making matters worse the homeowner will get no say in the matter and given no option to avoid this as once the lender sends the notice, the home goes up on Zillow. And just because the homeowner gets a letter from the lender about a missed payment doesn’t mean the homeowner can’t get caught up on the mortgage. In fact, most times the homeowner gets caught up, and the home never goes for sale. And even if the home does eventually go into foreclosure, it can take years before the home is available for sale.
As for the bottom 80% and the NAR… No matter what happens – that should all work itself out organically. There will always be a vicious open door. Some of the 80% will get by and get enough business to make it work for them. Some of the 80% will drop out while the abundance of continual new licensees makes up the difference.
Anyway, I think there’s a lot more to be said from those that see it much differently. But for now, I’ll just leave it at that… Thanks for the vine, and here’s to having a wider view and listening to those that see it differently
Drew MeyersPosted at 13:11h, 16 June
I do agree with you that many leads on Zillow are garbage, and a waste of time for many top agents.
Qualified leads is the name of the game. Which gets me back to my longstanding belief that whoever delivers that will be the next big player in the industry –> https://geekestateblog.com/next-major-consumer-win-real-estate/
But just because some leads are garbage now doesn’t mean instant offers isn’t going to work, and drive huge seller lead volume.
dependablehomebuyersPosted at 00:18h, 21 August
I think Zillow is on the right track by offering a product for homeowner to sell their house instantly. I would however disagree that it’s a smart idea to pair up homeowners who want to sell fast with a real estate agent. This can make the process more complicated than if they connected the sellers with investors directly.
stephaniPosted at 15:54h, 24 August
Ughh… Zillow.. Its a love/hate thing for me. As a realtor you have to embrace it but it is such an expensive tool for crappy leads. Its also very annoying when your clients search exclusively on there (after you tell them not to!) and send you listings that have already sold.. I’m happy they have made it connected to our IDX feed to make it more accurate and up to date. [url removed]