Why Zillow’s ‘Instant Offers’ Pilot Program Doesn’t Matter

Zillow is testing a new program in a couple of markets.  They have a pool of investors who will generate an instant offer on your house, picking it up on the cheap without the time, hassel or expenses usually associated with an ordinary real estate transaction.

There’s nothing new about this. For more than a decade, investor groups have created marketing campaigns to help them identify home owners who will take significantly less for their properties to have a swift and hassel free transaction.  And there are people for whom such an offer has great appeal.

I think about my good friend who, at age 80, wanted to divest himself of a rental condo that was a mess.  He considered the value, and was about to list (with a Help-U-Sell broker!), when an investor group contacted him out of the blue.  They gave him about 80% of fair market value.  He took the offer because he wouldn’t have to clean the place, do extensive repairs, sweat out inspections and appraisals or pay many of the normal costs associated with a sale.  Yes, he lost money . . . or rather he exchanged some money for convenience and quickness.  For him, it made sense.

As the real estate industry continues to scramble and ‘innovate’ to re-establish an identity with consumers, some recent entries to the business have adoped a similar approach.  Open Door, now in Phoenix and a few other markets, is buying houses in much the same way.  They are marketing the program as a new approach to residential real estate, one that relieves many of the ‘pressure points’ that weigh so heavily on home sellers. (Translation:  they are buying low, paying cash, fixing and flipping).

The first time I encountered this kind of program was back in the 1970s, when ERA Real Estate built their whole marketing program around the notion, ‘If we don’t sell your house, we’ll buy it!’  It sounded pretty good.  But after a few years it became very obvious that they weren’t buying many (or any) houses!  The terms of ‘we’ll buy it’ included a sales price based on 70 – 80 % of value, and few sellers were willing to take that kind of hit!

The Zillow program – if it survives the pilot, which it should – will appeal to some home sellers;  but they are the same home sellers who are by-passing brokers to take a quick fix already.  It is competition for HomeVestors (the ‘We Buy Ugly Houses’ guys) and Open Door more than competition for us.

Listen:  we have the best program in the business for home sellers interested in making a move with minimum inconvenience while maximizing their hard earned equity.  While  40+ years old, it still looks wildly innovative compared to current alternatives.  Don’t get distracted!  Remember who you are:  you are in the Equity Preservation business!*  And nobody does it better than you!

*Everyone else is in the Equity Consumption business!  They are into taking as big a bite out of the seller’s equity as possible.  The ‘We’ll buy your house’ people are just taking an even bigger bite!