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I apologize if there is already a thread about this. I couldn't find it.
I was listening to the Zillow CEO talking about their new plan to buy and sell homes and deal with mortgages, title, etc. It's interesting. I am sure many on here will dislike it. They said it won't hurt realtors because if they are in the business, there will still need to be buyers buying homes.
I think it won't take long for it to have completely changed Zillow. They are now doing Zillow Offers in my area. As best I can tell, here's how it works:
1. Some potential seller indicates interest in getting a Zillow offer.
2. Zillow alerts their listing partner in the area (a Zillow Premier agent spending $2K/mo of a total spend of let's say $120K/mo.)
3. Zillow Offers has a different agent (also a Premier agent as per above) represent them as a Buyer, making the expected low "convenient and cash" offer.
4. Zillow has a 3rd agent (also Premier, as above) that, should the Seller accept the low Zillow offer, this 3rd agent will become the listing agent for Zillow when they flip the house.
I don't actually know what agent 1 will do. his is how the program started - if they reject the offer, a friendly Zillow Premier agent got the listing lead. Perhaps they will still get the "thanks for the offer, but that's too low. But I'm still interested in selling my house" leads.
So, when you're not the agent spending $2K that gets to represent them for the buy, and you're not the agent who spends $2K and represents them for the sale .... why would you stay in the other 97 agents locally spending $114K/mo? If Zillow's not buying enough homes, the Buying agent isn't happy; thus, the Listing agent becomes unhappy.
It is quite true that joint venture mortgage business makes money. Title insurance business makes even more money. Warranty companies make money. But I suspect title is regulated enough that you can't just create ZTitle out of thin air and you're in business. But I could be wrong.
The major hurdle becomes making more money on Zillow Offers transactions while you've lost a bunch of non-participant Premier agents and their cash.
that's why I say they will have completely changed. If nationwide brokerages couldn't make money, especially by offering affiliate services, they wouldn't.
Zillow is the #1 search portal. They have the eyeballs. But we'll see if individual MLS' then stop syndication agreements, or require Zillow to change the website in such a way to lose eyeballs.
in my market, $12B of residential real estate changed hands through MLS last year.
If they got 10% market share, they'd be about tied for #1. The way they're scaling it, I'd guess they have to pay a pretty high split - let's say they make 15% and that's about an even $5MM share. What does it cost them to generate that $5MM share?
In my opinion for the most part it does hurt realtors. The reason is they will probably again loose money on this deal, paying too much for homes and burn up a bunch of venture capital trying. In the meantime whatever percentage of houses do not get listed and sold at the normal commission rates that would have gone into realtors pockets with realistic pricing and sales times. Also from what I am hearing about some of the other ibuyer programs, many sellers don't really understand it and end up not happy in the end. They hear "we'll buy your house at market price." but don't understand a convenience fee will be subtracted...probably 8-13% in an up market, maybe more in a down market, and all repairs found in the inspection report will be deducted....and they'll pay all of the traditional seller fees.....that they might not pay by a motivated buyer....I'd say 10-30% of the transactions I've worked on in the past 2-3 years have had buyer picking up some expenses like title insurance that the seller might pay and probably will pay with an ibuyer transaction.
Of course there is the convenience, but the iSeller pays a lot for the convenience.
I see the models changing quickly as the ibuyers test the market.....won't buy here, won't buy in this price range, won't by certain aged homes.....everyone things there is big big big bucks in the brokerage business....and in the end, I think it is a lot tougher than most people think it is.
To me many of these players have cherry picked the best markets to play....Dallas, Phoenix, Tampa, etc....in up markets...and they still don't look like geniuses....think of what happens when the market shifts. It will. Or they go into less robust cities...and they will as they are forced to grow by their VC investors...they'll burn through a lot of cash and then close shop.
I apologize if there is already a thread about this. I couldn't find it.
I was listening to the Zillow CEO talking about their new plan to buy and sell homes and deal with mortgages, title, etc. It's interesting. I am sure many on here will dislike it. They said it won't hurt realtors because if they are in the business, there will still need to be buyers buying homes.
I would love to hear people's thoughts.
There was a similar thread in the general Real Estate forum. You may want to read those responses, too.
Zillow's iBuyer program has been around for about a year. In their first year, they purchased 686 homes and sold 177 of them so far. They have deep pockets to continue to buy and iBuyer is a great thing for people that get notice they have to relocate across the country really fast.
We had one client that moved here using Zillow's iBuyer program and she said she walked away from $20k for the convenience. I honestly don't know many people that can walk away from that kind of cash so I think iBuyer will have a market segment, but I don't think it will be a big one.
Like all new models, making it through a recession is always the test of the strength of a new system. That will be the game changer. If iBuyers can do well in recessions, then it will become a permanent fixture in the real estate marketplace.
I have many Zillow reviews, have bought their leads and have done co-marketing with realtors over the past few years.
It's hit and miss but lately, I'm not too thrilled.
I'm paying a lot for advertising and now second guessing the whole process.
It seems the quality of the leads has dropped and it's often the same homes over and over again - ones in country club communities that have been on there for 497 days (home is cheap but the HOA dues are super high - like $2500 monthly plus there's a membership buy in).
Anyone feel the same?
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From a mortgage broker in Florida
