Zillow entering the flipping market?

Question

https://www.engadget.com/2018/04/15/zillow-flippin...

Zillow is entering the home flipping market starting in Las Vegas and Atlanta.  What are people's thoughts?

Bill B. · Answer

If you’re pissed about Zillow taking 19%, I’m sure you’ve been bitching about wholesalers taking 30% for years. Go to open door or offerpad they both take 12% total in Vegas And that was off an estimate 10% above zestimate. How much money will a realtor put in your bank account in 7 days versus Zillow? The same reason people sell to wholesalers is the same reason people should sell to Zillow or Opendoor or offerpad. And the best part, no ones forcing them to. They get an email in 24 hours saying you will get this much money, here’s the expenses, a clear half a page email, we close in 3-90 days you choose.

I just don’t understand the anger at Zillow for offering WAAAY more than wholesalers have been offering for years and years. I don’t think I’ve read one post about people being pissed at wholesalers for their ”lowball” offers?

Account Closed · Answer

I sit with a large popcorn bowl ready to watch the show. Their crash and burn will be very entertaining.

Rochelle Ray · Answer

I think the issue that I have is not with wholesalers making lowball offers.  Anyone, including Zillow has a right to make any offer they want and the homeowner has the right to accept or refuse.  It is capitalism at its finest.  I love America for this very reason!  And I think @Robert Adams is being misunderstood here, but my issue and I think the bigger issue is the manipulation to the homeowner of theirproperty value.  I am a stickler on professionalism to keep our business as investors (wholesalers, flippers, landlords, etc) having a good reputation or else we will end up where homeowners will run like we are the plague when they see us coming, which many already do.  We don't need that reflecting on us.

The homeowners trust Redfin, Zillow, and all those sites.  They don't know any different.  They don't understand the algorithms that are used and how it can be totally wrong to value the homes and that many factors are left out.  If Zillow uses this to their advantage to manipulate a homeowner into thinking their home is worth less so they can make more money, this is pretty much fraud!  They are gaining the trust of the homeowner by pretending to be an expert in their field and falsifying the info into their advantage so they can make money.  Wholesalers do not do that.  Good ones are up front that they have to make money, too and that they will have to sink money into the home for resale.  This is their best offer, take it or leave it.  They will not falsify the value of the home to other homes in the area.  Zillow already does this.  We all know their values are unreliable.  As they say in the movies:  It is more of a guideline, lol!

Sorry to be wordy but just wanted to put my two cents in that I feel it is an ethical thing more than anything.  I certainly hope it doesn't catch on.  At least most wholesalers are professional and do many a good service!

Robert Adams · Answer

As long as homeowners are uneducated on the fact of how much money in equity they are giving away these programs will thrive. If homeowners see their bottom line w these services and with a traditional sale most people will go with the inconvenience of showing their home for a week and being in escrow for a month to keep THOUSANDS of dollars in their pocket.Most homeowners don't know what their home is worth or that it has gone up as drastically as it has over recent years. So they get an offer and see the bottom line from opendoor or alike and they see profit they are happy.

Now if they were provided a bottom line from and agent at real value without the excessive fees and compared that to an estimate from opendoor etc I think most homeowners would choose to save thousands of dollars vs sell a month and a half sooner.

They are in Las Vegas and Henderson now as well.  My experience with them on the buyer side is over worded contracts but pretty smooth transaction and listed slightly above recent comps which is typical for our market. On the sellers side..............I wouldn't recommend it.

Here is how it works:

Over the past 7 years the Vegas Valley has seen enormous growth in the housing market and home values. Many people have no idea what their home is worth. Some homeowners even rely on outdated autovaluations like Zillow's Zestimates for home values. Then opendoor or similar company gets in touch with a homeowner (because they are spend an insane amount of money on marketing to reach sellers that are not in tune with the market). FOR EXAMPLE: The homeowner maybe bought their home in 2011 for $200k for the sake of round numbers. Now lets fast forward to 2018 and the home is now worth $400k. The seller looks on websites like Zillow and sees there home is worth $380k. This seller is already underselling themselves by $20k, but wait it gets worse. Then opendoor comes along and says we think your home is worth $370k to $380k BUT we will buy it right now from you without you having to market the home or do any showings etc for $375k but we are going to charge you a fee up to 12% (in our example this would equate to $45,000). Then on top of that they charge a 7% Commission (that would equate to additional $26,250). Then opendoor would clean the home, maybe paint it, maybe put new carpet if you are lucky then resell your home for $400k in a week or two. Below I have compared 2 examples of selling traditionally with a Realtor at 6% commisions (which it may be less as it is negotiable) vs selling with opendoor or similar service.

Comparing Opendoor to a Traditional Sale with a Realtor

$400,000 Home via OpendoorHome Value: $400,000Sales Price: $375,000Charge 12%: $45,000Commissions 7%: $26,250Total Costs via Opendoor: $71,250Net Proceeds to Owner: $303,750

$400,000 Home via Opendoor

$400,000 Home via a RealtorHome Value: $400,000Sales Price: $400,000Traditional Closing Costs 3%: $12,000Commissions 6%: $24,000Total Costs via a Realtor: $36,000Net Proceeds to Owner: $364,000

$400,000 Home via a Realtor

In this Example Selling with a Realtor will save you $60,250!!!

Most homeowners I know could use an extra $60,000+ in their pocket! It is my firm belief that homeowners do not know how drastically their bottomline is affected by selling with these unethical companies.BEFORE YOU SELL WITH ANY COMPANY ASK THEM "HOW MUCH MONEY WILL I WALK AWAY WITH?"AND THEN COMPARE THAT TO A TRADITIONAL REALTOR SALE.I confronted them on a public post of Opendoor on Facebook, you can see for yourself how it went below(after my question about them charging 19% they stopped responding): HERE IS THE ORIGINAL POST

Petra M. · Answer

@Aaron Hunt  Thanks!  I'm late to the party :)

Aaron Hunt · Answer

Thoughts are in the original thread...

https://www.biggerpockets.com/forums/311/topics/558136-zillow-announces-plans-to-flip-properties

Bill B. · Answer

So every realtor should be forced to tell every seller how much faster they could sell using opendoor or offerpad? If you want them to educate sellers about what a realtor could do for them the realtor should definately be forced to tell sellers about their options. You can’t ask them to help their competitors for free.

And don’t forget. You have to make these suggestions/laws/rules, whatever you want to call them apply to every wholesaler and every FSBO. After all that’s all they are is wholesalers or birdogs. Depending on their deal.

Robert Adams · Answer

Well said! Couldn't agree more!

This is exactly my point, homeowners are being taken advantage of by the way these companies present/advertise themselves as well as the info they give to the consumer. The consumer is making an uneducated decision because they are only given half of the info. If they are being honest the other half of the info should be provided as well and then the seller can make an educated decision. If they want to sell for convenience and pocket less money that is fine with me but they should know how much that convenience is costing them.

Robert Adams · Answer

The point you are missing is that they offer a transparent list of costs for their process and the bottomline for the seller from opendoor etc and do not offer the uneducated seller anything about the costs and bottomline they would received should they sell it traditionally. Most sellers have NO IDEA how much money they are leaving on the table. If they did I doubt most of them would sell to these services. Lare corporations have a duty to protect the consumer and that is not happening here on a massive scale. The seller is also under the assumption that Opendoor represents them and is treating them fairly which I also don't believe is the case. They are looking out for Opendoor etc.  The seller sees a sales price and assumes the other fees are normal and agrees, this is deceiving to say the least.

James Wise · Answer

I see that they are planning on working WITH Realtors to flip these homes. That's interesting because people have been saying that that Zillow was going to be putting Realtors out of business ever since they opened up shop in 2004. This is probably due to the fact that 14% of homes were sold FSBO in 2003, the year before Zillow launched. However only 8% of homes were FSBO in 2017..........13 years into their disruption of the industry.....🤔💭

Zillow entering the flipping market?

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