How will You Respond to Zillow’s ‘Instant Offers’?
80s movies are known for their campy “One Man Army” films where a Hero will face a large horde of enemies. Remember the “Rambo” series? Villains tend to underestimate this person at first, considering him/her just one person. They are quickly proven wrong.
So in the case of Zillow and Real Estate Agents, who is the “One Man Army?” Is it Zillow versus Us or You against Zillow or are we even engaged in battle at all?
Competition isn’t just from other brokerages.
It’s also from companies like OpenDoor.com and OfferPad.com, with attractive online platforms that promise sellers a quick, hassle-free, cash sale. This week, Zillow joined the fray, introducing its “Instant Offers” platform in two test markets, Las Vegas and Orlando, Fla. The platform enables sellers to receive and compare cash offers from selected investors, as well as obtain a CMA from one of Zillow’s paying customers, a Zillow Premier Agent.
For many real estate agents, these online marketplaces feel like a threat to their role in the transaction and their livelihood. Zillow, which makes a significant share of its revenue providing tools and services to real estate agents, has moved to dispel that concern, saying it will encourage, but not require, sellers to connect with an agent to close the transaction.
It remains to be seen whether Zillow will be successful enough to expand Instant Offers to more markets. If it does, the promise of a quick sale may capture some consumers’ attention. But many professionals say they relish the opportunity to compete and communicate their value as a real estate professional.
6 Things To Say to Sellers who are considering the option of a direct, cash sale?
- I work in this market and know the community better than any website could.
- I will help you get your house ready for sale.
- I will market your home to the widest possible audience, not just investors seeking to make a profit on your home.
- I will aim to get you the best offer possible, and I have the skills to help you negotiate the terms of the sale.
- One of the best parts of my job is helping you find a buyer who will love your home the way you do.
- As a REALTOR®, I follow a Code of Ethics that includes a pledge to “protect and promote the interests of [my] client” (Article 1). These online companies may facilitate your transaction, but not necessarily with your interests in mind. With “Instant Offers,” unless you choose to work with an agent, you’ll be on your own handling the details of the transaction.
If past performance is any indicator of the future, sellers will continue to gravitate your way. The National Association of REALTORS®’ 2016 Profile of Home Buyers and Sellers showed that 89 percent of sellers worked with a real estate professional to sell their homes. Only 8 percent of home sales in 2016 were FSBOs, a form of which is direct sales.
Direct sales may pose other challenges to the industry.
In addition to competing for sellers’ attention, these online investor sales may exacerbate the already tight inventory situation many of your buyer clients are facing. Instant Offers, for example, connects sellers with a small group of investors who are partnering with Zillow. Sellers who go that route are taking their home out of the inventory for the average buyer.
Also, sellers who choose direct sales aren’t listing their property on the MLS. How will that affect the reliability of MLS data? Not just real estate professionals but also economists and governments use that data to spot market trends, determine fair market values, and make plans.
John Mosey, president of NorthstarMLS, which serves more than 16,000 real estate professionals in Minnesota and western Wisconsin, sees no cause for concern on that front. “We’ve dealt with things like the ‘coming soon’ phenomenon and off-MLS activity, and we’re seeing that these trends aren’t shifting FSBO numbers,” he says. “Our transaction volume in 2016 was $19 billion, and we’re in the Midwest, where market values don’t come close to the coasts. So you don’t need the off-market activity to get a true picture of what’s going on. I think the potential harm with these off-market listings is that a lot of them have never been market-tested, so it’s hard to get an accurate appraisal.”
Think more deeply about how to communicate Your Value.
Denee Evans, CEO of the Council of Multiple Listing Services, lives in Las Vegas where Instant Offers is being tested. She draws a correlation between real estate and her previous work in the financial industry. “Even when people began doing their own online trading, there was a healthy industry for financial planners. You need a professional to help you with that. There are too many little things to keep track of,” she says.
“Even with my real estate knowledge, I don’t buy and sell houses myself,” Evans says. “There’s no replacement for a professional who does this every day and knows the ins and outs of the market.”