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> Only if you think your home is a lemon will you consider selling to Zillow. What if Zillow just makes an offer that’s high enough that you think it’s unlikel

> Only if you think your home is a lemon will you consider selling to Zillow. What if Zillow just makes an offer that’s high enough that you think it’s unlikely you’d do better if you went through the hassle of looking for other buyers?

JoshCole 5y ago
Lets say P(h) is the price that a home fetches after being listed, O(h) is the price that an owner expects to get from selling the home, and Z(h) is the price that Zillow expects to get if they sell the home. An owner will sell to Zillow when O(h) < Z(h). They will not sell when O(h) > Z(h). Zillow's outcome would then be (P(h) - Z(h)) * (Z(h) >= O(h)). The extremely important thing to note is that this is an asymmetric information game. Therefore O(h) < Z(h) is going to be self-selected such that O(h) < Z(h) because P(h) is closer to O(h) then Z(h) is to P(h). If Z(h) was actually able to be a reliable and better estimate of O(h) then it would mean that P(h) wasn't determined by information available to O(h) that was not also available to P(h). The market would already offer this value to O(h). So O(h) value is going to be reflective of Z(h). Its only if the non-public information changes the value that O(h) != Z(h).
- acjohnson55 5y ago
  Like the previous posts said, the advantages of selling to Zillow are price certainty and immediacy, so your model isn't quite right. But I agree with the adverse selection problem you highlighted.
leohart 5y ago
Even if Zillow does, they still take a 12% fee. When I was selling my house a year ago in Texas, Zillow's offer is both lower than comp in the area AND has a hidden 12% fee. Did you know they also charge YOU the repair fee? I had a chance to talk to an inspector who looked at my place who has previously worked with Zillow to inspect houses that they were buying. The gist is that Zillow are getting the worst houses (the ones with trash everywhere, burnt carpet, feces on the wall). For them to get a "normal" house is very rare. Nobody with a normal house (and better) under normal condition (and better) will sell to Zillow. You can get a 1%+3% fee full service (pro pix, pro staging, pro cleaning, ...) any day of the week and still sell your house in mere weeks. I was not even in Austin. I guess if you don't care about making tens of thousands in a month (or hundreds of thousands in nicer cities), then you have bigger things to worry about. Zillow's offer was already higher than OfferPad and other iBuyer's services. After my experience on the sell side with Zillow, I am incredibly wary of ALL iBuyers on the buy side.
- deleted 5y ago
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JoshCole 5y ago

Lets say P(h) is the price that a home fetches after being listed, O(h) is the price that an owner expects to get from selling the home, and Z(h) is the price that Zillow expects to get if they sell the home. An owner will sell to Zillow when O(h) < Z(h). They will not sell when O(h) > Z(h). Zillow's outcome would then be (P(h) - Z(h)) * (Z(h) >= O(h)). The extremely important thing to note is that this is an asymmetric information game. Therefore O(h) < Z(h) is going to be self-selected such that O(h) < Z(h) because P(h) is closer to O(h) then Z(h) is to P(h). If Z(h) was actually able to be a reliable and better estimate of O(h) then it would mean that P(h) wasn't determined by information available to O(h) that was not also available to P(h). The market would already offer this value to O(h). So O(h) value is going to be reflective of Z(h). Its only if the non-public information changes the value that O(h) != Z(h).

acjohnson55 5y ago
Like the previous posts said, the advantages of selling to Zillow are price certainty and immediacy, so your model isn't quite right. But I agree with the adverse selection problem you highlighted.

leohart 5y ago

Even if Zillow does, they still take a 12% fee. When I was selling my house a year ago in Texas, Zillow's offer is both lower than comp in the area AND has a hidden 12% fee. Did you know they also charge YOU the repair fee? I had a chance to talk to an inspector who looked at my place who has previously worked with Zillow to inspect houses that they were buying. The gist is that Zillow are getting the worst houses (the ones with trash everywhere, burnt carpet, feces on the wall). For them to get a "normal" house is very rare. Nobody with a normal house (and better) under normal condition (and better) will sell to Zillow. You can get a 1%+3% fee full service (pro pix, pro staging, pro cleaning, ...) any day of the week and still sell your house in mere weeks. I was not even in Austin. I guess if you don't care about making tens of thousands in a month (or hundreds of thousands in nicer cities), then you have bigger things to worry about. Zillow's offer was already higher than OfferPad and other iBuyer's services. After my experience on the sell side with Zillow, I am incredibly wary of ALL iBuyers on the buy side.

deleted 5y ago
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