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Zillow Instant Offers: How It Will Impact Local Real Estate Investors

I've been flooded with questions about Zillow "Instant Offers" and so I wanted to address it formally with everyone. 

Yesterday Zillow announced 'Instant Offers' where off-market sellers can put their homes on Zillow and receive offers without agents who don't work for them.

When a seller clicks on the "Get offer" button, their information will be sent out to 15 investors and those investors will have the option to offer on the property.

The seller will then have the opportunity to accept or reject the offer.

From the limited information they have released, it looks like the investors will be large institutional investors(Wall Street) and not local area investors.

Right now they are running the test in two markets: Las Vegas and Orlando.

If they like the results they are going to consider adding additional markets.

If not, they may just kill the idea altogether.

My opinion on this:

1.  Right now, it isn't really something to think much about.  Even if it gains traction it won't be an overnight thing so as of today it is business as usual.

2.  Most sellers want to do business face to face when they sell a home.  Their house is typically their biggest asset and at least in the beginning, I think most sellers are going to be nervous about getting "scammed" selling their house online until it becomes mainstream(if it ever does).  I think there is a good chance that many sellers may get that quote online(just like they look at the Zestimate) and then call someone local who they can meet and talk to in person.

3.  There's already a bunch of backlash from real estate agents who feel that Zillow is now trying to cut them out of transactions.  Keep in mind, Zillow's main source of income is selling real estate agents buyer leads.  If too many agents get upset about this, Zillow may feel pressured to discontinue the service.

4.  Even if they do allow at some point local area investors to be one of the 15 bidders, these will never be good deals for us.  If we are competing against 14 other investors, we will never get a good enough price to buy - someone is always willing to overpay.

5.  The prospecting methods that we utilize will always allow us to get to sellers first and will always work to get great deals.  If Zillow is successful, they will only get a fraction of the total motivated seller market share.

Overall, on the whole, I would project this to be a complete non-event for us, BUT as with everything else it is something to always keep an eye on.  Things are always changing and we are always keeping an eye out for anything that may impact our or your investment business.

Here is the article that was released yesterday in case you want further details:

Today, Zillow launched a pilot program in two cities — Las Vegas and Orlando, Florida — called “Zillow Instant Offers,” with the promise that a home sale transaction can be completed in as little as a week.

The new Zillow product allows prospective homesellers to receive all-cash offers from a hand-selected group of 15 large private investors along with a side-by-side comparative market analysis (CMA) from a local Zillow Premier Agent.

Zillow Instant Offers mobile view.

Homesellers who accept one of the offers are encouraged by Zillow to use an agent in the process, but they are not required to do so.

Once offers are received from participating investors, the homeowner can choose one of three options:

1. Accept an offer and sell directly to an investor

2. Accept an offer and use an agent to manage and close the transaction

3. Reject the offers and list the property on the MLS with an agent

The initiative promises a more streamlined and friction-free transaction, managed by Zillow-owned dotloop, and a process that may give the seller more certainty.

Zillow is leveraging its consumer brand and distribution to offer a radical new business model for homesellers first pioneered by Opendoor and gaining favor with investors and homesellers in test markets.

Even though it is a two-market test, and Zillow will collect no money from the test, the move may jolt some in the real estate industry who are suspicious of Zillow’s every move.

How it works

Homeowners participating in the Instant Offers program take the following steps:

1. Sellers can sign up their home for Instant Offers by providing several photos of the home and filling out key information about the property, including home type, bedrooms, features, roof type, flooring, any major remodels, painting history, age of appliances, HOA status and any other important disclosures.

2. The home description then goes to the 15 Wall Street investors, who are either licensed as brokers or use a third-party broker license, and the property details also get sent to participating Zillow Premier Agents, who will be asked to submit a CMA. Investors and agents have 24 hours to submit an offer, and their offers expire in five days.