Zillow Will Use Zestimates To Make Cash Offers for Homes
In its beginnings, Zillow started as a stand-out online realty market listing website that soon grew to be the go-to for home buying and rentals. Known for its use of maps and filters to easily find not just what you were looking for, but in the right area, Zillow became the foundational resource for everything real estate.
This worked especially well for “flippers”, or those who buy “fixer uppers”, do the repair work, then flip it for a higher sale. Being able to spot the right price in the right neighborhood is invaluable to making good profit.
Zillow Offers – a.k.a. Zestimate Service
And this is where Zillow’s new “Zillow Offers” comes in. Beginning in 2018 and growing into 25 markets nationwide, and building on its Zestimate service which had always been an objective estimate at the value of a home, Zillow now presents it as a preliminary cash offer to do a property purchase. In many ways, and especially in these times, this could be a win-win for both Zillow and sellers to get through the process more quickly.
For consumers, the benefits are obvious. It’s like getting into a separate lane where you accept that you could get more with an official listing, but you don’t want to wait around until the right buyer sees and buys your listing.
This helps them establish and grow their business as an online portal for real estate buy-and-sell processes. When combined with their existing reputation, Zillow gains a much larger audience to sell these listings more quickly.
Of course, this has been a bit of a gamble and home sales has not taken off quite yet, but this is very understandable. The market is struggling as people and the economy are struggling. On average, people are finding themselves strapped in debt, more worried about maintaining their current situation, rather than expanding into a home or condo.
But Zillow doesn’t seem to be too worried about it right now, and perhaps for good reason. For starters, economies recover, and being in the right place with the most listings puts you in the position to clean house (pun not intended).
Another additional benefit to Zillow’s plan is that it helps remove both uncertainty and insecurity about the buying process, which can often seem convoluted between real estate agents, sellers, and the bank. Often included are home inspections and the like that factor into the valuation of the home.
Zillow Home Inspections
This is an area that Zillow helps in, starting with the home purchase. This is a pretty straightforward practice where an employee from Zillow conducts home inspection, provides a report detailing the repairs that are needed and then calculates an offer tailored to what the homeowner can afford. Afterwards, the homeowner sets a good date when to close the deal. As soon as a sale is completed, Zillow automatically charges a fee of 7.5% to the seller.
It’s a good setup because Zillow has been around long enough to understand the real estate markets to provide an accurate assessment of market values for that particular area. Those who turn down Zillow’s offer typically find a difference of only about 1%. Zillow’s COO, Jeremy Wacksman says that they have enough data in 23 markets to feel confident about making accurate initial cash offers. An example he gives is if the neighborhood where you are living has homes with the same structure and already have been sold. In situations like these, Zillow would already have most of the data it needs to give a fair pricing and initial cash offer.
Zillow Is Still Not Profitable
However, this has drawn criticism for the company, as its posted losses of over $320 million despite the $1.7 billion invested in 2020. This would, of course, be a large shareholder concern, but Wacksman isn’t too concerned about that right now. “We’re still in investment and growth mode,” he said. “(Right now), we are attempting to break even on each unit … we’re trying to make market value offers for what it costs us to buy and sell homes.” Wacksman said. “Our goal is to make market value offers and get the Zestimate exactly right for what your home is worth,” he said. “And then we take on the selling process if you don’t want to do all that work yourself.”
At the end of the day, this long-game approach may likely weather the storm of 2020 and position them to be one of the more profitable real estate services available
Contact Ed Cook for all your real estate needs in Pompano Beach.