7 ms·

Zillow is the brokerage and they take fees when they buy the home from their users and depending on how they sell it they often take fees on that side of the tr

Zillow is the brokerage and they take fees when they buy the home from their users and depending on how they sell it they often take fees on that side of the transaction too. So when you see that Zillow "bought" a home at $500,000, the seller actually gets closer to $450,000 on average. They of course want the $500k price tag to hit the MLS records though, since it supports the endlessly appreciating housing market narrative. It's not as simple as a buy-low sell-high home flipping strategy. > "Altogether, Zillow Offers fees can add up to as much as 22% of your home’s sale price — much more than you’d pay while selling on the open market." [1] https://www.realestatewitch.com/zillow-instant-offers/ https://www.realestatewitch.com/zillow-instant-offers/

zdragnar 5y ago
That's basically all real estate agents, and if someone selling their home to zillow only pays 10% total (since sellers typically pay agents for both sides of the transaction) that isn't a bad deal for the home seller at all. Edit: I misremembered commission costs. 10% on the sale of a house is rather high unless the seller is covering additional costs as well.
- dreyfan 5y ago
  I understand that, I'm not suggesting it's a scam or anything (though typically in the US a home seller pays 3% to the buyers agent and 3% to the sellers agent). I'm saying when Bloomberg exclaims "Zillow is selling homes at a loss!" they're missing the point of the strategy. As long as the price they sell for still exceeds the fees they take, it's a profitable move. Also many of these transactions do not involve traditional brokerages whatsoever. People sell their homes directly to Zillow and other people buy the homes directly from Zillow.
  - midasuni 5y ago
    3%? 6%? My last house sale in the U.K. was 0.5% of the sale price to the estate agent (the buyer doesn’t pay anything). Legal fees on my side for selling and buying were another 0.5%, and a little for a survey. Total cost to sell and buy well under 1.5%. Why do you get for that 6%?
    - notjesse 5y ago
      6% has been the norm in the US for a long time. It is absurdly high and is why opportunities like iBuying exist. In the UK, there is no wiggle room for such ventures, but as the transactional costs in the US is steep, the market was ripe for disruption. You can usually expect your total transaction costs to be 8-10%, so there is a lot of margin in there for Zillow/Opendoor to operate as the only intermediary (buyer & seller agent, lender, stager, etc).
      - samspenc 5y ago
        Can confirm that 6% is the norm and average cut the agents take in the US. Typically 3% for seller's agent and 3% for buyer's agent. The entire commission is paid by the seller so the buyer never sees this, though technically those fees are baked into the final price they pay for the house. RedFin and others are trying to disrupt this model but made very little inroads so far.
    - zdragnar 5y ago
      At a minimum, the real estate agent manages coordination. Good agents are familiar with the local ordinances and can save you time and hassle (a city I once lived in insisted that homes had to have a city inspector go through prior to listing, and neither I nor my agent knew until we found out from a buyer's agent). Great agents will organize staging, professional photos (some companies put up "3d" walkthroughs on their websites), open houses, advertising, recommend investing in remodelling to list at higher prices (or when to pass on those things depending on the local market). Sometimes, paying an agent more than makes up for the cost by getting a better sale price. Other times, it is kinda pointless. (If you didnt know, seller customarily pays for both agents as well in the US).
      - midasuni 5y ago
        That was what the traditional agent told me a few months ago. I asked how much he sold an identical house next door to me 2 months earlier, he didn’t know. He wanted an obscene 1.5%. Turns out it was for 3% less than I got with my online broker which cost half what he wanted (and did professional photos, I didn’t want the 3D walkthrough for £99 extra, we don’t do open houses in the U.K.
- short12 5y ago
  10 percent is insane, most sellers with an agent pay 4-6 percent And honestly the cheapest way to get it done is a sign in your yard, a flat fee broker to get it on the MLS and a lawyer to finalize the sale Zillow and agents are not doing Jack shit to earn the commission they get
  - mistrial9 5y ago
    after obtaining a junior real estate credential in California, my irreverent twenty-something colleague told me with no equivocation "a trained monkey could sell these houses"
    - zdragnar 5y ago
      In a hot market, totally. Get out in the sticks or a smaller town in normal or slow days, and good agents will do a fair bit of legwork to sell a house.
      - bink 5y ago
        It's been so long since we've had a real down market. People are going to be shocked when it happens again.
        mensetmanusman 5y ago
        Down markets are all over in more rural places.
        tata71 5y ago
        For about ten more minutes.
    - hellbannedguy 5y ago
      I am shocked Realtors are not obsolete by now. 8 courses and a simple test, and if you're lucky they purchase Omissions & Error insurance. I would like to see commissions capped at 1% nationwide. (Oh yea, in CA you used to only need a 4 year degree in anything along with the 8 courses in order to get your Broker's license. Lobbiest from The Realtor's syndicate drew up a bill stating all brokers need to 4 years of work experience as a Salesman before sitting for the test. This durning Arnold's governorship. There was not one instance of a new Broker who got the license with the education exemption screwing up a sale. Arnold vetoed the bill. He said, "Since there are 0 problems, why make it more difficult to get a license. Gov. Brown ended up signing the bill though.)

zdragnar 5y ago

That's basically all real estate agents, and if someone selling their home to zillow only pays 10% total (since sellers typically pay agents for both sides of the transaction) that isn't a bad deal for the home seller at all. Edit: I misremembered commission costs. 10% on the sale of a house is rather high unless the seller is covering additional costs as well.

dreyfan 5y ago
I understand that, I'm not suggesting it's a scam or anything (though typically in the US a home seller pays 3% to the buyers agent and 3% to the sellers agent). I'm saying when Bloomberg exclaims "Zillow is selling homes at a loss!" they're missing the point of the strategy. As long as the price they sell for still exceeds the fees they take, it's a profitable move. Also many of these transactions do not involve traditional brokerages whatsoever. People sell their homes directly to Zillow and other people buy the homes directly from Zillow.
- midasuni 5y ago
  3%? 6%? My last house sale in the U.K. was 0.5% of the sale price to the estate agent (the buyer doesn’t pay anything). Legal fees on my side for selling and buying were another 0.5%, and a little for a survey. Total cost to sell and buy well under 1.5%. Why do you get for that 6%?
  - notjesse 5y ago
    6% has been the norm in the US for a long time. It is absurdly high and is why opportunities like iBuying exist. In the UK, there is no wiggle room for such ventures, but as the transactional costs in the US is steep, the market was ripe for disruption. You can usually expect your total transaction costs to be 8-10%, so there is a lot of margin in there for Zillow/Opendoor to operate as the only intermediary (buyer & seller agent, lender, stager, etc).
    - samspenc 5y ago
      Can confirm that 6% is the norm and average cut the agents take in the US. Typically 3% for seller's agent and 3% for buyer's agent. The entire commission is paid by the seller so the buyer never sees this, though technically those fees are baked into the final price they pay for the house. RedFin and others are trying to disrupt this model but made very little inroads so far.
  - zdragnar 5y ago
    At a minimum, the real estate agent manages coordination. Good agents are familiar with the local ordinances and can save you time and hassle (a city I once lived in insisted that homes had to have a city inspector go through prior to listing, and neither I nor my agent knew until we found out from a buyer's agent). Great agents will organize staging, professional photos (some companies put up "3d" walkthroughs on their websites), open houses, advertising, recommend investing in remodelling to list at higher prices (or when to pass on those things depending on the local market). Sometimes, paying an agent more than makes up for the cost by getting a better sale price. Other times, it is kinda pointless. (If you didnt know, seller customarily pays for both agents as well in the US).
    - midasuni 5y ago
      That was what the traditional agent told me a few months ago. I asked how much he sold an identical house next door to me 2 months earlier, he didn’t know. He wanted an obscene 1.5%. Turns out it was for 3% less than I got with my online broker which cost half what he wanted (and did professional photos, I didn’t want the 3D walkthrough for £99 extra, we don’t do open houses in the U.K.
short12 5y ago
10 percent is insane, most sellers with an agent pay 4-6 percent And honestly the cheapest way to get it done is a sign in your yard, a flat fee broker to get it on the MLS and a lawyer to finalize the sale Zillow and agents are not doing Jack shit to earn the commission they get
- mistrial9 5y ago
  after obtaining a junior real estate credential in California, my irreverent twenty-something colleague told me with no equivocation "a trained monkey could sell these houses"
  - zdragnar 5y ago
    In a hot market, totally. Get out in the sticks or a smaller town in normal or slow days, and good agents will do a fair bit of legwork to sell a house.
    - bink 5y ago
      It's been so long since we've had a real down market. People are going to be shocked when it happens again.
      - mensetmanusman 5y ago
        Down markets are all over in more rural places.
        tata71 5y ago
        For about ten more minutes.
  - hellbannedguy 5y ago
    I am shocked Realtors are not obsolete by now. 8 courses and a simple test, and if you're lucky they purchase Omissions & Error insurance. I would like to see commissions capped at 1% nationwide. (Oh yea, in CA you used to only need a 4 year degree in anything along with the 8 courses in order to get your Broker's license. Lobbiest from The Realtor's syndicate drew up a bill stating all brokers need to 4 years of work experience as a Salesman before sitting for the test. This durning Arnold's governorship. There was not one instance of a new Broker who got the license with the education exemption screwing up a sale. Arnold vetoed the bill. He said, "Since there are 0 problems, why make it more difficult to get a license. Gov. Brown ended up signing the bill though.)