You might expect the creators of Zillow Instant Offers to be the best source of information on their new service. But in this case, that's not true! Zillow makes 70% of their revenue from real estate agents, and this program is testing a major pivot from the company's usual pro-agent message. Though Zillow won't tell you the whole truth, we will! Read on to get straight answers on this new offering.
You are likely to get hounded by agents
The 800,000 agents who pay Zillow each year for leads and ad space make up a majority of the company's revenue. Now the company is introducing a program that completely eliminates the need for an agent… or does it? Zillow knows who is buttering its bread, so they're offering agents who pay to be a part of their Premier Agent Network the opportunity to participate in instant offer sales by providing the buyer and seller with a comparative market analysis. But that's not all…
Instant offer sellers also become leads for Zillow Premier Agents. These agents can call you to solicit your listing. Zillow salespeople may also call in order to help make sure their agents are making money. But if you list your home and don't accept any offers, you're safe from sales calls, right? Nope. Regardless of whether you take any offers, you should expect to get lots of calls.
This is a test (for now)
Zillow Instant Offers is only being rolled out in a small subset of markets. Why? As mentioned above, real estate agents are the company's biggest moneymaker and this program is the most anti-agent service they've ever launched. If the company gets an onslaught of negative backlash from agents, they can reply, "This is only a test!"
So where is the program available? Right now, sellers in Orlando and Las Vegas can take advantage of it. Do you live somewhere else and want to try it? There are other similar programs that have been successful for years and are available in your area. Click here to request a list.
Expect low offers
Zillow has limited the buyers in its program to 15 of the largest institutional real estate investors nationwide. Generally, these large institutional buyers are only looking to buy two types of homes : (1) cheap homes they can buy, flip and make a quick profit on, and (2) reasonably-priced homes they can make great rental income on. That means you shouldn't expect to see lucrative offers with lots of concessions. Instead, anticipate lowball offers that allow you to take your money and run.
Other similar instant offer programs include more localized and less institutionalized buyers. Local buyers are typically willing to offer more money for properties.
You won't get the best price for your home
The instant offers program is mostly geared toward sellers who value speed and convenience over the highest final sales price. Why? Because, as mentioned above, new listings will only be seen by 15 potential buyers. Sellers who are most likely to benefit from this speed over price dynamic include anyone who is selling suddenly for personal reasons, like a divorce or a death in the family. Sellers with a quickly approaching deadline like a job transfer are also good candidates for instant offers.
But what about everyone else? Generally, the best way to get the highest price for your home is to get as many buyers as possible to view your home. The more buyers who view your home, the more offers you are likely to receive. The more competition you see, the higher the final sales price will be.
Ironically, Zillow CEO Spencer Raskoff wrote about this topic at length in his recent book Zillow Talk. The Zillow Instant Offers program directly contradicts their CEO's own advice to home sellers. This advice was based on the data from millions of home sales. With instant offers, you are doing exactly what Raskoff says not to do. You are purposely and severely limiting the number of buyers who see your house is for sale.
Put simply, if you prioritize selling for a high price over fast and easy, you need to be seen by all buyers, not just 15 investors who are looking for profits.
This is not a free service
If you look at the fine print, you'll see that sellers who participate in the instant offers program pay a fee to the investor who purchases their home. Zillow has not yet announced how high those investor fees will be. You'll also see that the program terms say a buyer agent will be involved in the sale.
As to commissions, Zillow Chief Revenue Officer, Greg Schwartz, writes, "... we require all buyers to be represented by an agent, and we aggressively encourage sellers to have representation through language on our site, email, and phone calls." Schwartz goes on to say that the program is designed to generate leads for Realtors, as outlined above.
The Bottom Line
If you value speed and convenience above a higher sales price, Zillow Instant Offers may be an excellent option for you. If so, we recommend you also list your home with similar instant offer programs in your area to get the best outcome.
Want to sell for the highest price?
If getting the highest possible sales price is your selling goal, consider listing with Home Bay. We offer comprehensive, affordable, flat-rate home sales and we'll publish your listing on Zillow, Trulia, Realtor.com, the MLS and thousands of popular real estate sites to maximize your buyer exposure. We'll also do all the paperwork and be there every step of the way to answer your questions.
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