NOTICE: I wrote this last month during the firestorm of the StopZillow campaign. I held off posting it just to make sure I was correct. After one month of time it seems that I was correct so here you go!
By now you have seen all the StopZillow petitions and agents screaming like Chicken Little about Zillow’s Instant Offer. There are some agents who are loving the thought but those are most likely the ones who pay Zillow over $5k per month for a small part of a zip code so they are getting the leads from Instant Offers.
Before I give you my take on the whole situation, I have two questions to all the agents freaking out about this:
1) Who is leading the charge at StopZillow.com?
2) Have you really thought about what Instant Offers by Zillow really is?
Who is StopZillow? StopZillow is ran by Greg Hague who self-titled himself “The Real Estate Maverick”. He runs a real estate coaching company named Real Estate Mavericks. He has set up this website for agents to sign the “petition” against Zillow.
At the point of writing this, he has collected the contact information of over 16,000 agents (now 29,000 signed).
The “petition” states that Zillow is intruding into brokerage by an unlicensed firm, damages homeowners who may unknowingly sell their home, and demeans the role of a Realtor.
What is Instant Offers by Zillow? It is a test program Zillow opened up in the two hottest real estate markets, Orlando and Las Vegas. Both cities saw some of the largest drops in pricing during the real estate crisis and both have seen their values rise back up to almost pre-crisis times.
The program itself is pretty simple just like a similar website OpenDoor.com (someone agents actually should be watching but that’s for another post). A homeowner goes online and submits a form about their home and uploads some pictures. Zillow puts that info together along with all of their data over the last decade and submits it to national investors for a bidding war. Those numbers, along with a CMA by a local agent, is submitted back to the homeowner along with all of the fees associated with the transaction. This all happens within 24 hours and the offer is good for 5 days. The homeowner can choose whether or not to have a local agent help them out with the transaction as well at a set cost.
The homeowner can pick to sell instantly to the investors or pick the agent to list their house. The agent would get their full commission if the house sells.
This is very similar to the agent who promotes the service of “I will sell your house in 30 days or I will buy it” but with Zillow, there are no 30 days of house cleanings, showings, fixing up of the property, decluttering, or staging. It is just an Instant Offer to buy the house.
For those who are more visual learners, let’s look at a traditional transaction vs Instant Offers so you can see what is happening.
Home Seller – George. George has a house that was hit hard during the housing crisis. He bought at $500,000 but it went down in price to nearly $250,000. He now owes $390,000 on his mortgage and the house prices are back up but now only around $450,000. He wanted to sell the home back in 2012-2013. Now it is 2017 and he is desperate to sell.
Traditional Home Sale:
Price = $450,000
Sale Price = $420,000
6% commission = – $25,200
Avg spent fixing = – $10,000
Closing Costs = – $21,000
Net = $363,800
So, in a traditional sale, he is very close to breakeven before closing costs. But, let’s look at a Zillow Instant Offer:
Price = $450,000
Instant Offer = $360,000
9% “Service” Fee = $32,400
Net cost = $327,600
Traditional sale wins at nearly $36,200. So, agent, are you still scared? This Instant Offer pricing would be about the same if I showed you one of those Sold
As you can see, Zillow Instant Offers isn’t for your normal homeowner. At such a loss difference between traditional and Instant Offer, who would ever use Instant Offers?
There are people who will use it (and OpenDoors) but I will get to that next. First I want you to think about the why instead of the who? Why would Zillow do this? It is easy but I will ask you another question before I answer. Agent, what is the most lucrative lead but the hardest to get? A listing lead.
So, just like the guy who does Home Sold
Who would use the Instant Offer and does it have a place? There will be people who use Instant Offers and lose money on their home. These are people who are being transferred and the company is paying the costs. These are people who needed to be out of their home years ago but couldn’t sell and now they can make a break for it because maybe they were in the middle of a relocation or move and now have two homes. These are good people that are down on their luck who are close to bankruptcy or foreclosure and just need to sell it super quick and don’t have the money to fix it up or get it “show” ready.
I am sure by now you have figured out that I don’t mind Zillow creating Instant Offers. It’s yet another gimmick and maybe it will turn into a full product. Only time will tell to see which one. I do think this shows one of the biggest issues facing the real estate industry. No, it isn’t Zillow, but the 16,000 agents who have taken way too much time focusing on the big evil giant and forgot about their businesses.
There will always be a place for the professional real estate agent/broker who runs their business like a business. There will always be a place for those who don’t whine about homeowners asking for a discount in fees because “they are professionals with a history, knowledge, blah, blah” and in return NEVER hire a professional photographer, web designers, SEO, social media, digital marketing, etc. How can you argue that the homeowners “owes” you 3% of their home for your knowledge and then turn around and don’t even want to pay $10/mo for a website or $80 for professional pictures? What’s really bad is those pictures, social media, $10 FB ad, & other small items are to help you sell the listing that you are “owed” 3% of!
There will not be a need very soon for those type of agents. Gone are the days of lying to consumers that you are a “Top Producer” when you only sold 2 homes last year (since most states won’t allow the consumer access to those numbers). I am sorry if you are one of those agents because you will be replaced within 12 to 24 months with apps and outside websites. The good news to those agents who are not like those agents or like the agents who feel the need to StopZillow (and give your contact info to a real estate coach), there will always be a place for you in the real estate transaction.
The good business owner real estate agent/broker will be the limo company or small taxi service in an Uber world. Each will have their place depending on what service is needed.
My suggestion? It’s simple! Worry about your business and how to strengthen your business. Whether that is creating new websites, pounding the pavement, working closely with other agents around you, build a team, streamline your workflow, add videos, and/or come up with a great way to advertise and market yourself. Invest in your business! Figure out how much your time is worth and maybe hire a professional or two to help you build your business.
Or, you could do what Greg Hague just did. I am actually very impressed that he was able to quickly gather 16,000 agent contacts that he can now promote his coaching to. I wonder if he will create an anti-Zillow or “How to beat Zillow” class? Well played Greg. Maybe you are The Real Estate Maverick!