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Zillow Offers The End Game For Zillow

Is Zillow Offers The End Game For Real Estate. An Expert Review Of Zillow Offers For Home Sellers and how homeowners will start to use Zillow.

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Is Zillow Offers The End Game for Zillow? The battle for buying your home for cash is heating up. Zillow has now entirely moved from a publishing real estate site to a nationwide brokerage showcasing their listings along with listings from other real estate brokers.

Zillow has turned its Zestimate from a valuation tool to a full-fledged buy it now button, where Zillow will make an offer to buy your house at the Zestimate price. This appears to be Zillow’s end game as their method for getting homeowners to sell their homes to Zillow. However, there’s a caveat, Zillow still has to send an inspector to decide on the cost of repairs if any repair work is needed, and they adjust the final sale price accordingly. 

To make Zillow Offers a reality, Zillow charges a commission of 7.5% of the home’s sale price. Zillow’s Zestimate button and Zillow Offers has become a direct-to-consumer business model, that makes any seller to Zillow Offers, a For Sale By Owner

Jeremy Wacksman, Zillow’s COO, recently said that the difference between Zillow Offer’s cash offer and what a home may end up selling for is 1%. If a For Sale By Owner sells a $500,000 home and pays 2% buyer’s agent commission, then a seller’s gross proceeds before closing cost are $490,000. However, if you sold your home to Zillow using Zillow Offers, you may sell to Zillow for $495,000; yet, you still have to account for the 7.5% Zillow commission fee. The total gross proceeds after selling to Zillow would be $457,875. It would appear that selling your home as a For Sale By Owner is better, and you’d be $32,125 richer. As a result the best way to list your home for free us with Richr.

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Zillow lost $320M in 2020 and aims to break even eventually. Zillow is still trying to figure out how to purchase and flip properties and make a profit. Zillow is likely to ‘bite the hand that feeds them by alienating Zillow Premier buyers agents (their massive source of income), and attempt to find buyers themselves (without paying a buyer’s brokers commission) so as to keep more of the 7.5% commission it collects. It would appear evident that this is how Zillow can break even and become ‘the end game’ for Zillow; controlling the transaction from end-to-end. 

Opendoor had a significant impact on Zillow over the last few years as Zillow pivoted to Zillow Offers in what would appear to have been a rush move, so as not to be left behind. Zillow should have created a real estate platform where real estate agents directly listed on Zillow and not the local MLS, to control the real estate transaction experience. 

Zillow could have thereby created a different version of Zillow Offers; instead of being a means to make a cash offer, it could have been a finance product that empowered a buyer’s agent to help their buyer purchase any home without a finance contingency.  In this alternative model, they could have charged seller and buyer fees simultaneously, without holding onto the inventory. Also, it could have given more tools to real estate agents that they need for a successful sale, such as title, loans, and homeowners insurance. Had Zillow gone this route, it could have created a line of buyers ready to purchase a home and charge less for Zillow Offers, all while turning a profit.

The future of Zillow is uncertain if they decide to make Zillow offers their end game. They desire to create a one-stop-shop experience with their end game described here but are making defensive business decisions because of their competition. What home buyers and sellers need is the ability to transact for less, on one trustworthy platform, where all their financial needs are met, with the ability to access proactive maintenance, warranties, and moving services.

How can Zillow Offers make a difference? Create loyalty by including every service around the transaction and beyond it; otherwise, Zillow creates an open door to Amazon or someone else.

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