Today portal giant Zillow launched its Instant Offers program in two test markets. The announcement will undoubtedly rattle the industry. To help you cut through the noise, here are 11 burning questions with our best take on answers.
To help you cut through the noise, here are 11 burning questions with our best take on answers. Add your own your ideas about the new program in the comments.
How does it work?
Zillow’s new Instant Offers test allows prospective homesellers to receive all-cash offers from a group of big-name investors, along with a side-by-side comparative market analysis (CMA) from local Zillow Premier Agents.
Homesellers who accept one of the investor 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: accept an offer and sell directly to an investor; accept an offer and use an agent to manage and close the transaction; or reject the offers and list the property with an agent on the MLS.
Will it compete with me as an agent?
For now, Zillow Instant Offers is only a test in two markets — Orlando, Florida; and Las Vegas. If proven popular in those markets, it could create new competition on the listing front.
But if you are a Zillow Premier Agent, you might be one of the agents offering a CMA to get in front of homesellers who might prefer to use an agent versus a potentially lower-priced investor offer.
When will it come to a market near me?
Maybe never. But if the test works, Zillow will probably take aim at markets outside the big metros, like Opendoor has done. Opendoor is now in Las Vegas, Phoenix and Dallas-Fort Worth and plans to make offers soon on homes in several other markets.
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 theoretically could go anywhere.
Still, there are lots of “ifs” in here, so it’s likely that nothing will likely unfold quickly.
It took Uber five years to get big; it has taken Redfin 10 years to carve out market share — and most new products and new tech ventures fail.
One of Zillow’s tests years ago was the controversial “Make Me Move” product, which in Orlando has only 29 homeowners testing it today (out of 2,500 listings in that market) — not the scale Zillow hopes to achieve with new products that it knows will shake up the industry.
Will it change how you do business?
It could. The process of selling a home is arduous and arcane, full of anxiety and uncertainty.
Technology can only do so much to solve human problems, but enough smart people are now focused on this part of the transaction that change is inevitable, helping homesellers and agents save time and money.
Better ways to make offers, visit homes and close transactions are being studied, tested and acted upon by some savvy tech companies.
For now, the products only deal with investors, but the learnings will be applied to all types of buyers and sellers in the future.
Opendoor, for example, is working on a quick and easy mortgage service that could streamline the purchase process for buyers.
Will it diminish the role of the Realtor?
Generally, most of the real estate technology being cooked up these days is created to help real estate agents do their job better.
Zillow’s new program, while not requiring an agent, is encouraging homesellers to use a real estate professional. Is this Zillow doublespeak? Is the giant portal secretly trying to cut out the Realtor?
Zillow will earn $1 billion this year, with $700 million of that coming from Realtors. Is it going to walk away from that stream of income? Unlikely.
Why would Zillow do this?
The company says it is responding to a consumer need: homeowners looking for easier ways to sell.
But it is also true that Zillow is a fast-growing technology company tasked with constantly feeding a Wall Street beast that expects great things from it.
The pressure is on to find new sources of revenue and grow them quickly. Now that it has created a monster consumer brand, it can easily test new products and services and act on them quickly.
It is also threatened by new entrants like Opendoor and must offer a competing product as these new business models get traction.
What should the industry do about it?
Individual agents should be opportunistic and find ways to work with all technology companies when they come to town. Ignore the shaky ventures, but climb all over the ones that make sense.
Agents should also work with their brokers to figure out the best ways to position themselves as superior to these new and burgeoning models. Some in the industry may choose to fight Zillow on its new product, and that could temporarily slow them down.
Consumers expect technology to make their lives easier. Is your trade association, franchise or brokerage working on solutions to make selling a home easier? They should be.
Is Zillow breaking its promise to not get involved in the transaction?
It seems like it might be. While you could argue that Zillow already sits in the middle of the transaction by steering most of the eyeballs viewing homes, this test is different.
Zillow is a middleman in the selection of who might buy a home and how it is done — more of a marketplace than a media company. However, you might expect its business model to continue as an advertising company, charging agents and investors to have a place in the product and not a piece of the commission like Opendoor.
But who knows?
Who do I call to get involved with these models?
Call the big dogs. Spencer Rascoff is the CEO of Zillow; his email is firstname.lastname@example.org. Eric Wu is the CEO of Opendoor; his email is email@example.com. Brian Blair is the CEO of OfferPad; his chief of staff is Megan Stratton at firstname.lastname@example.org.
Is Instant Offers legal?
Zillow Group says it is legal and that the operation of Instant Offers does not require a broker’s license, though the company does hold a legacy broker license in the state of Florida that it inherited as part of an acquisition.
“By testing Zillow Instant Offers, we are providing a technology platform where consumers who are already interested in selling their homes can receive non-binding offers from reputable institutional investors,” Zillow spokeswoman Amanda Woolley told Inman. “We do not represent or otherwise advise any party in the negotiation, purchase or sale of real property, nor do we hold ourselves out as providing real estate brokerage services.”
Compensation seems to be key for now. Zillow is not getting paid by anyone during the test.
Under Florida law, a person can qualify as a real estate broker if the person — for another, and “for compensation or valuable consideration” — “takes any part in the procuring of sellers, purchasers” or “directs or assists in the procuring of prospects or in the negotiation or closing of any transaction which does, or is calculated to, result in a sale…”
Nevada law considers a broker to be any person who — for another, and “for compensation or with the intention or expectation of receiving compensation” — “lists or solicits prospective purchasers,” among other practices.
Should you create your own Instant Offers program?
If you have access to big investors through your network, your broker or your franchise, you might try. We expect many more models like this to be rolled out. We suspect that the major franchisors and brokerages are watching closely, perhaps trying to figure out how they can participate or even create their own versions.
Most importantly, focus on solving homeseller anxiety about selling a home. Continue to deliver superior customer service and come up with ways that you and your broker can make it faster and easier for your customers.
No one understands the complicated emotions around selling property better than Realtors on the front line.