Listing giant Zillow is dipping its toes into the buying and selling business. This new move comes shortly behind online brokerage and listing aggregator, Redfin, which began buying and selling homes directly in 2017.
There is little information available on Zillow Instant Offers as of yet. But Zillow appears to be hoping to cash in on some sellers’ willingness to “value convenience and time over price.” In other words, Zillow is hoping sellers will accept low-ball offers in return for a seamless closing.
Zillow is testing markets in Phoenix and Las Vegas, so California agents don’t need to worry about this development — for now.
Redfin Now is also in the testing stage, but their service does impact California real estate agents, as it serves California’s Inland Empire and San Diego.
Redfin is interested in homes that are easy to access and unhindered by liens, limiting homes it will consider to homes that are:
- owner-occupied or vacant;
- single family residences (SFRs) and townhomes and condos in some cases, depending on the homeowners’ association (HOA);
- built after 1960; and
- in good condition.
Importantly, Redfin will not consider homes with solar leases or underwater homes.
The biggest benefit to using Redfin Now is the program’s flexible timing.
Redfin Now claims it can take as little as one week from the initial meeting to closing. That’s a huge advantage when a homeowner needs to sell quickly, whether it be due to a move for work or because they need the funds to close on a home they are buying.
Alternatively, the homeowner can choose to extend closing up to 60 days in advance. This flexibility of timing is hard to beat.
But does Redfin Now offer a fair price? Or, like Zillow, is it banking on sellers’ prioritizing convenience over money?
Sorry, homeowners: Redfin Now is a lot like Zillow. It claims to offer a “fair price,” but according to investment documents, Redfin expects “customers who sell through Redfin Now will typically get less money for their home than they would listing their home with a real estate agent.”
On top of offering less money, Redfin also charges sellers a 6%-9% fee. This includes the typical 6% buyer and seller broker fees, as well as a 1%-3% “market risk” fee.
Of course, these charges may balance out, depending on how much money a seller was planning on putting into small repairs, staging and paying mortgage and HOA payments while selling the home. But that’s a calculus each seller will need to consider when weighing the convenience of Redfin’s instant listing service.
Should California agents be worried?
Redfin, Zillow and other online real estate sites have been disrupting the real estate market for years, to regular, widespread negative reaction from agents. But that negative reaction and concern are rarely warranted.
This time around, it’s more of the same. As Southern California agents encounter Redfin Now listings, they may feel tempted to become angry about big investors coming in and taking business away from hard-working agents — they might even become concerned about where real estate is heading.
But agents can remember this: these homes make up a very small percentage of listings and mostly consist of desperate sellers willing to overlook the fact that they’re receiving less money for their home in exchange for convenience.
The vast majority of sellers will continue to enlist the help of an experienced real estate agent who can sell their home for market value.
Think of this real estate market “disruption” as more of a minor detour from normal market activity, one that few will take.
