We’ve all heard about Zillow’s opaque home valuation practices, high fees, and tendency to back out of deals. So how competitive are its offers? The answer depends on the seller’s specific circumstances. Let’s consider three factors that can affect a home’s sale price:
Its high fees
The fees charged by Zillow when buying a home are fairly competitive, especially compared to the fees charged by traditional iBuyers. For example, a selling cost fee of 6 percent will cover most of the transaction costs, including title, escrow, and transfer tax. Another fee of 2.5 percent will cover a variety of expenses, including taxes, maintenance work, and utilities.
Zillow offers an array of services, including buying and selling homes. they surveyed and studied handle everything from cleaning up the house to marketing and selling the property. For some sellers, this can be a very efficient option. If there are hardly any tasks or obligations to complete, this may be a good choice. Zillow has several options for both sellers and buyers, so it’s best to compare the services to find out which one is right for you.
Zillow also works with other lenders on its platform. It has built a marketplace with over 50 lenders across the country. These companies pay Zillow on a cost-per-lead basis. They also charge a subscription fee for their Connect services, which allow lenders to advertise on Zillow’s website.
Its tendency to back out of a deal
If you’re considering selling your home, you may be wondering how Zillow makes its decisions. The truth is that it’s a big, national corporation. As such, it has little time to analyze individual homes and take a cash hit with every purchase. So, it’s easy to understand how it can back out of a deal if it’s not satisfied with the results.
One reason is its supply chain. Zillow has a long list of houses to flip, and renovations require supplies. The backlogs can be so numerous, that a single piece of pipe can hold up an entire renovation. As a result, Zillow purchased more homes in recent quarters than they sold and were stuck with a lot of unsold inventory.
Zillow’s failure in this area will hurt their reputation for years to come. Thousands of jobs have been eliminated, and the company recently took a $304 million inventory write-down. The writedown is primarily due to recently purchased homes that the company thinks it can sell at a higher price than it actually paid for them. The company plans to reduce staff by 25%.
Its limited geographic reach
Zillow has aggressively expanded its home flipping business over the past year, but then pulled back from the strategy after a bad bet on home prices. This reveals a fundamental flaw in the iBuying model: it depends on investors to “flip” homes, which they cannot do themselves. A recent study found that two out of 10 homes flipped by iBuyers ended up in the hands of investors last year. The rate is even higher in minority communities.
Zillow’s remaining inventory of homes for sale represents a small fraction of U.S. homes sold annually, but the remaining inventory is still very small, and it intends to sell them to a range of buyers including nonprofits, institutional landlords, and families. However, even if Zillow exits from iBuying, other iBuyer companies will likely continue the practice indefinitely. While the iBuyer companies’ practices are clearly profitable, they also remove a significant portion of the affordable housing in some communities.
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