Zillow has become the go-to site for consumers wanting an estimate of a home’s value or a list of what’s available for sale in a neighborhood. But this fall, the website will go beyond real estate listings and start to make offers on Denver-area homes.
After launching Zillow Instant Offers in Phoenix and Las Vegas this spring, the Seattle real estate giant will expand the program to Atlanta in September and Denver before the end of the year.
And there will be competition. Opendoor, which has a four-year lead on Zillow in providing instant offers, is gearing up to launch in mid-October in metro Denver, its 15th market.
“We’ve already hired the general manager who will lead the office and have begin hiring for additional roles as well. We’ve got a local office space and have even begun partnering with local vendors/tradespeople,” said Opendoor spokeswoman Cristin Culver.
Opendoor, which has done about 20,000 deals, uses software to predict a home’s value and makes an instant offer, to which it adds a 7 percent transaction fee. If the seller agrees to the offer, they turn around and flip the home to another buyer.
“Will it attract every kind of homeseller? Probably not. It will attract sellers that have to sell quickly,” said Steve Danyliw, chair of the market trends committee at the Denver Metro Association of Realtors.
Firms trying to lure sellers with cash offers and promises of a quick sale aren’t new. Those “We Buy Ugly Houses” signs and posters have been around for years. Early last decade, home builders like Lennar even offered to take a current home off the hands of their customers to help facilitate a sale.
Because Zillow, and to a lesser degree Opendoor, has the size, deep pockets and consumer recognition to muscle out listing agents, its entry into this part of the Denver market could disrupt the status quo. But that doesn’t mean Denver’s brokerage community is planning to light the torches and grab the pitchforks to keep them away.
“There aren’t a lot of nerves or apprehension. I don’t think there are big concerns out there,” said Danyliw. “We see a lot of new things and new ideas enter the market all the time. For the most part, most of them don’t really stick.”
Some of the concerns agents had about Zillow Offers comes from an early proposal to use a third party to buy the homes it purchased. The fear was that Zillow would recruit sellers and line up buyers in advance, eliminating commissions for agents.
But Jeremy Wacksman, president of the new product line at Zillow, said the model being used has agents involved.
“We are not a house flipper. We aren’t looking for distressed inventory or people who need to sell, and our fee is typically a couple of percentage points above what you would pay selling on your own,” he said.
Denver homeowners will be able to click on a button in the Zillow website requesting an instant offer. They will need to fill out a form providing information on the house and within two days should get an initial cash offer.
If a seller wants to move forward, they will be put in touch with a local employee. Zillow will then send out a licensed inspector, on its dime, to determine what kind of repairs are needed and if the information in the public record is correct, like the number of rooms and square footage.
And in what could prove key for some sellers, they get to set the closing date. That was a big draw for Dawn and Ken Hamm, who were looking to downsize their home in Anthem, a suburb of Phoenix.
“We were petrified of the selling process given our family dynamics,” Dawn Hamm said.
Even though they had completed a major renovation, they didn’t look forward to making the additional repairs a buyer would request. They didn’t want to cull the furniture to make the home ready to show. The couple had a disabled adult son in a wheelchair and several dogs who would have to camp somewhere else every time an agent wanted to show the home.
Another downside, the back and forth of negotiating, which can get protracted and personal. Hamm said she initially tried another instant offer firm but didn’t like what they put on the table. That’s when she turned to Zillow to see if they could do better.
“When Zillow’s offer came in and it was right around everything that had been selling in the area. I don’t know if we would have done much better than if we had tried to sell it traditionally,” she said.
And dealing with a company offered a different level of flexibility than dealing with individuals who needed a place to live. Zillow offer normally comes with a 90-day window to close the sale, but the company stretched out the closing deadline into December go give the Hamms enough cushion as they waited for their new home to be completed.
“The price was fair and the stress was gone,” she said.
Part of Zillow’s upside comes from the higher resale value that improvements will generate. On average, the company is discounting its offer about 2 percent from its estimated value of a home to account for the repairs needed and the carrying costs, Wackman said.
When it turns around and sells, the company promises to pay real estate agents the standard commission on both sides of a deal. And if consumers don’t take the offers, there is an upside for agents too who have teamed with Zillow in advance.
Steve Murray, president of Real Trends in Castle Rock, said agents affiliated with Zillow could find a way to turn the program to their advantage.
“A overlooked benefit for both the premier agents and Zillow is that they will likely get hundreds of inquiries from consumers to look into the program, many of whom will not take the buyout offer but rather use a premier agent to market the home in a conventional process,” Murray said.
And the program won’t be a slam dunk for consumers. Depending on the type of properties it is interested in and the amount of money it has available, Zillow may not make an offer. Wacksman said initially the company is looking for homes around the median price in the market. That means the higher-end homes that can take weeks or months and are more of a headache to sell aren’t what the company is pursuing.
As for lower-priced homes, which can still sell in a weekend in metro Denver, sellers will probably be better served in letting multiple buyers go at it. Without testing the market, it can be hard to know what a buyer is really willing to pay, said Jim Smith, an agent with Golden Real Estate.
Smith said good agents will still get listings from buyers and sellers who recognize the value they provide. For him, the question is whether consumers who use instant offers will end up leaving money on the table.
“For sellers in particular, this is important, because it is only through maximum exposure achieved through the multiple listing service that you’re going to reach all the people who might bid up the sales price of your home,” he said.
