What happened in the real estate industry this week was preceded by a long drum roll, delivered to the beat of massive funding rounds for direct homebuyers, disrupted music and transportation industries, the infiltration of convenience into every aspect of our lives, and the undeniable focus on that precious lead: the homeseller.
The sound of the snare finally broke Monday with a major announcement from real estate’s most powerful consumer brand — Zillow.
With a program called Zillow Instant Offers that positioned the company right next to the transaction, the real estate giant could be seen raising its hands to start a new score.
What is it?
Zillow’s test program called Zillow Instant Offers 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 says it is responding to a consumer need: homeowners looking for easier ways to sell.
Where is it happening?
Zillow launched a pilot program in two cities — Las Vegas and Orlando, Florida.
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
By selecting an investor offer, a home sale transaction can be completed in as little as a week. The initiative aims to offer a more streamlined and friction-free transaction, managed by Zillow-owned dotloop, and a process that may give the seller more certainty.
What about the money?
Zillow will collect no money from the test.
Who are the investors?
Right now, the only two investors that Zillow has confirmed are OfferPad (a direct competitor with Opendoor) and Invitation Homes.
The industry immediately reacts
The response from the industry was swift.
Predictably, some believed this product is evidence that Zillow is inserting itself into the real estate transaction. Others worried about the effect that Instant Offers could have on areas where investor activity is already higher than normal. And some welcomed the chance to get a CMA in front of sellers and move in on other potential disruptors, like Opendoor.
What Realtors should know
Coming soon to a city near you?
Zillow’s new program, while not requiring an agent, is encouraging homesellers to use a real estate professional.
If the program is successful in the pilot markets, you can expect Zillow to roll it out quickly in additional cities. It has the distribution (consumers); it has Premier Agents in every market, and it is working with national investors who could theoretically go anywhere.
One agent’s experience
Zillow Instant Offers raises many questions: How often will consumers choose investor bids over Zillow agent advertisers? If they go with an investor offer, will they use the agent advertiser to close the deal? Is Zillow acting as a brokerage or just a new type of matchmaker?
The answers aren’t clear yet, but Realtor and Zillow Premier Agent Veronica Figueroa’s experience with the test since Monday appears to prove at least two things: Instant Offers resonates with prospective sellers and will put agents on their trail.
Figueroa has nabbed 48 seller leads through Zillow Instant Offers since it launched, and she’s working to see how many she can convert into listings.
She has not been contacted by any Instant Offers leads so far. She’s only sent CMAs their way. But she’ll begin reaching out to the best candidates in a few days, knocking on their doors and dropping off seller guides.
Zillow only provides agents with contact information for Instant Offers leads if the consumer chooses to proceed with them based on the CMA, but that won’t necessarily stop go-getters armed with lead addresses from getting in touch.
The broker license question
For years, Zillow has promised not to become a real estate broker, and the company says that it still has no plans to do so — Instant Offers doesn’t represent buyers or sellers, nor does Zillow hold active broker licenses in Nevada or Florida.
But one big question that remains is whether Zillow would need broker’s licenses to operate Instant Offers legally if it were to begin accepting compensation.
In Florida and Nevada, a person only qualifies as a broker if he or she collects or anticipates to collect compensation for broker services. (Zillow is not getting paid during the Instant Offers pilot, and the company is not currently charging Premier Agents extra to participate in the pilot.)
It will be up to state regulators to decide whether Zillow’s Instant Offers complies with real estate license law, though answers from them were not immediately forthcoming.
What we do know is that in both of Zillow Instant Offers’ test markets, along with several other states, the law indicates that taking part in obtaining purchasers for a sale requires a broker’s license, but only if compensation is involved.
Who’s competing with Zillow Instant Offers?
With 15 investors lined up, Zillow will enter the same sphere as well-funded companies (including Opendoor) that have become the darlings of online real estate in Silicon Valley. Eager to expand their ownership of housing in a strong market, Wall Street investors are scrambling to team up with the tech world.
Opendoor vs. Zillow
Zillow Instant Offers is a marketplace for investors to compete for sellers, while Opendoor is a direct buyer.
Opendoor buys homes using debt from institutional investors, makes light repairs and then sells the properties at a premium.
Zillow does not buy any homes through Instant Offers. It acts as a middleman between homeowners on the one side and investors and real estate agents on the other, effectively creating a marketplace where investors can go head to head and compete for sellers.
What the two models have in common is their targeting of the homeseller experience for disruption and the ability to provide sellers with a quicker transaction.
Everyone has an opinion, including Zillow
The news elicited responses from different sides of the aisle.
Managing broker and local Realtor association president Sam DeBord had this to say about the news: “Zillow’s not technically becoming a broker with this move, but it’s taking on every activity it can that doesn’t require a license — smart. Some agents are screaming. Some are yawning.
“Let’s just not pretend that initiating a purchase offer for a buyer, providing the forms for the contract, and directing the services upon which it will be transacted isn’t a big shift.”
Rob Hahn, aka The Notorious R.O.B., put forth a couple of main takeaways: that “Zillow didn’t do Instant Offers to become a brokerage,” but rather entered this space because Opendoor, Offerpad and the like are “potential threats.”
Secondly, he said that, “any homeowner who takes an Instant Offer from an investor was never going to sell with a listing agent anyhow.”
And theories were expressed about Zillow’s motivations, with 1000watt’s Brian Boero attributing the move to Zillow’s ability to take “aggressive liberties” thanks to its monster consumer brand.
Coming from a different perspective, MooveGuru president Brian Friemel noted that Zillow Instant Offers “pushes the envelope” on Zillow’s “We buy ads, not houses” mantra, but that amid the “deafening fear mongering,” the industry missed an important point: Zillow is building a new seller lead service for its Premier Agents.
Meanwhile, Greg Schwartz extended an olive branch to the real estate community, with the message, “We believe in agents, and we always encourage consumers to work with them.”
And ultimately attracting over 15,000 views with a Facebook Live video posted Wednesday, Leigh Brown encouraged everyone to get back to work.
“Have you called the people you know recently? You know, to provide value? Or do you just assume that they should call you, just because?,” Brown wrote in an article accompanying the video.
“On that note, would y’all please start answering your dadgum phones? Consider that websites like Zillow provide info without having to be chased down,” she added.
Behind the scenes
Where was publisher Brad Inman when he got wind of Zillow’s announcement? Touring a home with Opendoor CEO Eric Wu.
Inman pulled back the curtain on the moments, little-known tidbits and stakeholders that populate the shadows of this monumental announcement.