Zillow’s Instant Offers program is booming past original estimates less than two months after the Seattle-based real estate tech giant initially launched its new homebuying and resale effort in Phoenix. And as of today, the program is live in Las Vegas.
On the eve of the Instant Offers expansion into Las Vegas — the second place where Zillow is buying up homes directly from consumers and reselling them on the open market, working with local agents to acquire and list Zillow homes — Inman got an exclusive look at the company’s foray into the iBuyer business.
News of Zillow’s Las Vegas expansion came the same day that iBuyer competitor Opendoor announced $325 million in Series E funding and a planned expansion into 50 markets by 2020.
“The initial consumer demand when we turned this on in Phoenix was much stronger than we thought,” said Jeremy Wacksman, who was recently promoted to president of the Zillow brand. “We’re outgrowing the space we set out to build in the office.”
The co-working space in downtown Phoenix is populated with several offices adorned with the Zillow logo, but as Wacksman noted, it’s already expanding beyond that space. At press time, the staff was a robust 35, but the company said that number could skyrocket to nearly 50 within the next couple of weeks.
“We’ve hired faster than we thought we would, so we’re into a second-floor cave downstairs to try and fulfill demand,” he added.
Initial estimates were that the company would have between 300 and 1,000 homes in its portfolio at any given time. Wacksman said it’s too early to tell for certain, but Zillow still feels good about that estimate.
Independent analysis shared with Inman from an upcoming paid report by Mike DelPrete, strategic adviser, tech entrepreneur and global expert in real estate tech, found that Zillow has purchased five homes so far, all in the Phoenix metro area, with one for sale listing and four “coming soon,” listings. Since January 2017, iBuyers have accounted for 7,600 individual transactions in Phoenix, according to DelPrete.
There were 125,272 transactions in the Phoenix metro area from January 2017 to the end of April 2018, according to Arizona Regional Multiple Listing Services, meaning if DelPrete’s analysis is correct, iBuyers accounted for around 4 percent of total transactions during that period.
A Zillow spokesperson confirmed that the company would have five houses listed by the end of the week and dozens under contract.
A lot of Inman readers have also been curious about Zillow’s profit margin, with the commissions it will pay agents, as well as renovation costs. Wacksman said it’s a matter of making turning homes around quickly and leveraging that equity.
“You don’t need a lot of unit profit if you’re leveraging your equity and you’re turning your homes quickly,” he said. “It may only be a few thousand dollars a house or less, but your return on equity every time you do that transaction is pretty decent. And if you return that equity a few times a year it’s a pretty good return.”
Starting today, Instant Offers is now live in Las Vegas, where Zillow will be partnering with brokerage GK Properties to represent it in its home purchases and sales.
“Zillow’s expansion into buying and selling homes in Las Vegas creates a great opportunity for agents and brokers in the Las Vegas area, and we’re thrilled to be on board as partners,” said George Kypreos, of GK Properties in Las Vegas, in a release. “Selling a home can be stressful, and homesellers want more control and transparency in the process.
“Zillow Instant Offers gives them that and will give local real estate agents opportunities to partake in the process,” he added. “This will be a big win for agents and homesellers.”
On Tuesday, Inman was also given an exclusive look into the actual process of how the parties come together to make an offer, buy a home, sell that home and generate leads for agents.
It starts with an inquiry from a consumer, who sends Zillow information and photos. Zillow then schedules an inspection, at the convenience of the consumer. What separates Zillow from other iBuyers is that the seller does not need to commit or sign a contract prior to the inspection.
After the inspection, the agent Zillow enlisted — in Phoenix, that’s been George Laughton and The Laughton Team — will go over the results with the consumer. It also creates a new lead for the agent, if the seller needs an agent to buy a new home.
Zillow then makes the offer with a flexible closing date — in one instance it cited, the company had to move the closing date up a week to accommodate a seller.
Kay Gerstel is one of the first people that sold her home to Zillow. She knew she wanted to go through an iBuyer — Phoenix offers a ton of options like competitors Offerpad and Opendoor — and just happened across the button to sell her house to Zillow.
“Both my husband and I work full time, we have a 3-year-old, a dog and a cat,” she said, as to why she wanted to sell to an iBuyer. “So the thought of trying to do a traditional sale, keep it clean, have people come over and show the house … that didn’t appeal to me.”
“Not having to deal with that hassle was really nice,” she added.
Gerstel recalled that the instructions were super easy and Zillow was very clear about what it wanted from her in terms of pictures to help craft its offer. Another thing she liked about the company was that it allowed her to do the inspection without signing the contract. She also was very happy with the offer Zillow ultimately made, which she said was higher than what other iBuyers offered.
“Zillow has been really communicative, really helpful in walking me through the process,” she added.
Inman toured one of the first homes bought by Zillow as it was undergoing it’s post-purchase renovation to get it ready for the market. The company isn’t really “flipping homes” — it told Inman that it’s spending, on average, $7,100 per home, although that number could change as things fluctuate. Typically the houses are turned around and ready to be listed in seven to 10 days.
Zillow is taking a three-pronged approach to the renovation, the first of which is to address any safety concerns — like a pool area that isn’t up to code — that may come up during the inspection.
Next, the company looks at any functionality issues. If there’s a door, window or cabinet that isn’t opening or closing properly, Zillow will make that fix.
Finally, the company looks at cosmetic fixes. For example, if every home in the neighborhood has granite countertops and the home the company bought does not, it will add granite countertops. The home Inman toured received all new paint on the interior and exterior.
Zillow also told Inman that it’s making a point to hire out locally as opposed to finding a big-box company to do all of the work.
That sort of local cooperation has been central to the Instant Offers early expansion. One example of that has been Laughton, Zillow’s first partner agent. Laughton has opened an entirely new wing at his office, with a staff of 15 that focuses on the Instant Offers program. The staff is broken down into valuations, offer presentation calls, relisting properties and closing.
“Taking some of our current team members and allocating them over to this side of the business has been interesting,” Laughton told Inman. “It’s a different spin on traditional real estate in a sense.”
Working as the agent for Zillow has helped Laughton’s team get more quality leads.
“Trying to dig up seller lead is really difficult, especially a good seller lead, I think this solves that problem,” he said. “It’s not cold-calling, they’re coming to you for one, and they actually want an offer on their house. That’s unlike anything we’ve done before.”
Because Zillow’s process doubles the transaction, that also doubles the commission Laughton is able to make on the front and backend of the buying and selling process, he confirmed.
Zillow however, has been coy about the actual percentage of commission it’s paying the agents involved, outright refusing requests for a specific number. Wacksman told Inman it’s a deal worked out with Laughton, and the company is not committing to a specific rate in all of the markets in which it will operate.
“We don’t want to commit to any standard practice,” Wacksman said, regarding the commission, and the practice of using the same agent for all buying and selling in a specific market.
Many agents have expressed concern about iBuyers as a way to remove them from the equation, but Laughton said that with Zillow, agents are getting a seat at the table.
“The industry is shifting,” he said. “We’re going to see more change to status quo in the next two years than we’ve seen in the last 50-100 years. It’s going to be a technological shift, not an economic shift.”
“Before agents weren’t at the forefront of this iBuyer movement, but now Zillow is partnering with agents to stay in the forefront,” he added. “Where would you rather be?”
Agents that Zillow has hired to buy and list the properties aren’t the only ones reaping the benefits of this new program. In the early phases, a handful of agents that advertise through the Premier Agent program are also getting leads from prospective sellers that chose not to sell their homes to Zillow and instead opt to take the traditional route. The company told Inman that aspect of Instant Offers is still in the early stages, too, so it’s not clear how many agents in each market will get the chance to use Instant Offers as a lead generation tool.
Becky Garcia of The Garcia Group reached out to Zillow after reading about the launch of Instant Offers on Inman. She said she’s generated over 90 leads and listed two since it launched in May. These leads are warmer than the ones they traditionally receive through online advertising, she said.
“We have a lot more activity than I thought we would have,” she said. “Coming into a new market, [Zillow] was pretty transparent with it being a new market and not knowing exactly how much activity we’d be getting.”
“We had set our own expectations a little low, but it’s definitely exceeding the expectations we set,” she added, saying they expected about 15-20 leads at this point.
As the company has in Phoenix with the Garcia Group, Zillow announced a partnership with Berkshire Hathaway HomeServices Nevada Properties and Coldwell Banker Premier Realty (Las Vegas), for its Instant Offers lead generation program.
With the expansion into Las Vegas, Zillow is ending an old aspect of Instant Offers, where it would connect buyers with third-party investors willing to buy the home. Offerpad, one of those third-party investors, previously cut ties with Zillow after it announced it would begin buying and selling homes. With the news, Zillow is ending its Instant Offers program in Orlando, where it previously connected sellers with those third-party investors.
“Our investor partners have played an important role in the process, and we hope to be able to involve them in the program in the future,” Wacksman said, in a release. “For now, by being the exclusive investor in the program, we are in a great position to consistently deliver a seamless, transparent process for homeowners — whether they take a cash offer or sell traditionally with a Premier Agent.”