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So what does it mean for me if I buy a home straight from Zillow? Better price?

by matte_black 9y ago

swlkr 9y ago
It would be worth it for convenient financing options/on click, even if the price isn’t lower
- matte_black 9y ago
  No advantage though for a cash buyer?
  - pyoung 9y ago
    Right, but if the point is to increase liquidity, the low hanging fruit is mortgage backed purchases. Homeowners will often take a smaller offer price in favor of cash because the closing process is easier/more certain. So Zillow might be trying to arbitrage that price difference between cash and mortgage purchases. And if they can find a way to scoop up part of the loan origination fees and the broker fees in the process, than I guess there could be some compelling revenues there.
smt88 9y ago
I'm betting you won't have to pay a commission to an agent
- matte_black 9y ago
  Which should mean a reduced price of at least 3%, since it’s the seller who pays the commission and factors it into the home price.
Finnucane 9y ago
Likely you'd get the same deal as any other real estate developer in the flipping business would give you. They'd be looking for undervalued properties that can be fixed up and resold at a profit. Which means they're on the open market and you're bidding against other purchasers, like normal.
- kenning 9y ago
  I know nothing about the housing market but to me it seems like this could be a pretty good move from zillow. They could theoretically use data on their millions of houses to find absurdly good deals and only snap those up.
- prepend 9y ago
  The problem seems to be that any homeowner getting an offer from Zillow would immediately know they had mispriced their listing and not accept. Unless Zillow has some new efficiency that no one else has (super contractors that can fix up cheaper than other investors, low cost capital) I don’t know how they will be able to outbid the market consistently as there aren’t enough dumb sellers with dumb agents out there. But maybe I’m missing a way how they could use analysis to identify “bargains” without the seller getting clued in and upping their price.
  - matte_black 9y ago
    A low priced home isn’t always a mispriced listing. It could be a fucked up home that’s super beat up and no one wants to touch. Or a seller that wants to get out immediately.
    - prepend 9y ago
      I meant low priced relative to value. In your example, Zillow wouldn’t want it either because it wouldn’t turn a profit. Unless they had some super efficient repair crew.
  - pyoung 9y ago
    I mentioned this elsewhere, but 'closing certainty' is a real concern in the real estate market, to the point where many sellers will take a lower offer price in favor of a cash buyer.
    - matte_black 9y ago
      I never understood why though, in the worst case doesn’t their house just take a bit longer to sell if a deal falls through? Aren’t there backup offers in play? Is taking a lower offer really better than just waiting a bit more for the higher offer?

So what does it mean for me if I buy a home straight from Zillow? Better price?

swlkr 9y ago

It would be worth it for convenient financing options/on click, even if the price isn’t lower

matte_black 9y ago
No advantage though for a cash buyer?
- pyoung 9y ago
  Right, but if the point is to increase liquidity, the low hanging fruit is mortgage backed purchases. Homeowners will often take a smaller offer price in favor of cash because the closing process is easier/more certain. So Zillow might be trying to arbitrage that price difference between cash and mortgage purchases. And if they can find a way to scoop up part of the loan origination fees and the broker fees in the process, than I guess there could be some compelling revenues there.

smt88 9y ago

I'm betting you won't have to pay a commission to an agent

matte_black 9y ago
Which should mean a reduced price of at least 3%, since it’s the seller who pays the commission and factors it into the home price.

Finnucane 9y ago

Likely you'd get the same deal as any other real estate developer in the flipping business would give you. They'd be looking for undervalued properties that can be fixed up and resold at a profit. Which means they're on the open market and you're bidding against other purchasers, like normal.

kenning 9y ago
I know nothing about the housing market but to me it seems like this could be a pretty good move from zillow. They could theoretically use data on their millions of houses to find absurdly good deals and only snap those up.
prepend 9y ago
The problem seems to be that any homeowner getting an offer from Zillow would immediately know they had mispriced their listing and not accept. Unless Zillow has some new efficiency that no one else has (super contractors that can fix up cheaper than other investors, low cost capital) I don’t know how they will be able to outbid the market consistently as there aren’t enough dumb sellers with dumb agents out there. But maybe I’m missing a way how they could use analysis to identify “bargains” without the seller getting clued in and upping their price.
- matte_black 9y ago
  A low priced home isn’t always a mispriced listing. It could be a fucked up home that’s super beat up and no one wants to touch. Or a seller that wants to get out immediately.
  - prepend 9y ago
    I meant low priced relative to value. In your example, Zillow wouldn’t want it either because it wouldn’t turn a profit. Unless they had some super efficient repair crew.
- pyoung 9y ago
  I mentioned this elsewhere, but 'closing certainty' is a real concern in the real estate market, to the point where many sellers will take a lower offer price in favor of a cash buyer.
  - matte_black 9y ago
    I never understood why though, in the worst case doesn’t their house just take a bit longer to sell if a deal falls through? Aren’t there backup offers in play? Is taking a lower offer really better than just waiting a bit more for the higher offer?