Valley homeowners know Zillow for its online valuations. People either love or hate Zestimates, depending on what it says about their own house.
The unofficial home appraisals have been around for more than a decade and are a way for real estate agents to advertise and reach potential buyers and sellers. But now, the Seattle-based company plans to begin buying and selling homes itself in metro Phoenix.
Zillow is expanding its Instant Offer program to the Valley and Las Vegas. Homeowners who want to sell can submit information to the company and receive a potential offer within 48 hours.
Zillow then plans to renovate and resell any homes it buys.
“Even in today's hot market, many sellers are stressed and searching for a more seamless way to sell their homes," said Zillow Chief Marketing Officer Jeremy Wacksman in a company statement. "They want help, and while most prefer to sell their home on the open market with an agent, some value convenience and time over price.”
Zillow’s not the first company to do it.
A few thousand metro Phoenix homeowners opted to forgo the typical sales process last year and sold their houses to Opendoor or OfferPad. Both firms make sellers online offers, typically within 48 hours, virtually sight unseen. They then make minor repairs and resell the houses for a profit.
These firms aren’t flippers, buying on the cheap and spending tens of thousands of dollars on big renovations and then reselling for hefty profits. And not all Valley houses will get offers from the real-estate firms.
These firms have been nicknamed “iBuyers” by the real-estate and investment communities because they use technology and conduct much of the transaction online.
It’s not clear yet how Zillow’s iBuyer plan will work or compete in the Valley, an already intensely competitive market for affordable homes.
Competition between investors, iBuyers and first-time buyers for Phoenix-area homes priced below $350,000 is already fierce.
The number of Valley homes for sale in that price range is down 20 percent from last year, according to the Cromford Report.
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San Francisco-based Opendoor launched the iBuyer model first and began purchasing Valley homes in 2014. The company bought about 1,600 Phoenix-area houses last year and sold 1,500, according to public real estate records.
Gilbert-based OfferPad was launched a few years after Opendoor started. The two firms accounted for about 5 percent of Valley home purchases last year.
Sellers to iBuyers typically pay 6 to 8 percent for the convenience of selling a home “as is” without listing it or having opening houses.
“Phoenix is becoming ground zero for this new phase of residential real estate,” said Opendoor Phoenix’s General Manager Kerry Melcher, who is also a longtime Valley real estate agent. “But despite the new companies attempting to move into the market, we invented this ‘direct buying' category that many other companies are now attempting to replicate.”
Many Valley real estate agents weren’t pleased to see Opendoor or OfferPad. Their concern was about the business these iBuyers would take from them.
Zillow is teaming with Berkshire Hathaway HomeServices Arizona.
“As a Zillow partner, our sales executives will be able to compete with investor buyers,” said Gordon Miles, president of Berkshire Hathaway HomeServices Arizona and Nevada.
Opendoor has been working to expand its relationship with real estate agents, paying them referral fees and giving them early access to its listings.
Zillow’s plan for buying and selling homes in metro Phoenix isn’t clear yet. But what is obvious is the market for affordable homes is going to get even more competitive.
That’s good news for sellers, but not first-time buyers who are already struggling to find Valley homes they can afford.