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Blog

Zillow – We Buy Houses Cheap

Posted by: John Crow
Date: February 03, 2020

Zillow buys houses cheap
Home > Home Selling Tips > Zillow – We Buy Houses Cheap

We’ve all seen them, those cheesy little bandit signs taped to the post in your neighborhood. They promise quick cash for your home. The person responsible for the sign is known as an off market flipper.  The dregs of the real estate industry, these often unscrupulous predators offer quick cash and an easy transaction. The problem is they are preying on uninformed consumers who fall for the promise of speed and simplicity at the cost of a substantial portion of their equity.  

Sound scary? Imagine if those same predators had a billion dollar marketing company behind them. Welcome to Zillow Offers!

The Man With The Shiny Bait

Zillow is led by CEO Richard Barton. Barton was the founder of online travel company Expedia and then Zillow, all while sitting on the board of Netflix.  He is part of the Silicon Valley Royal Family of tech disruptors. They are wolves in sheep’s clothing using shiny bait to capture and slaughter the entire herd of unsuspecting consumers. 

Zillow is a publicly owned company. They release their earnings report every three months.  As expected, Zillow Offers lost a fortune in its recent report and performed far worse than the year before.  In spite of this dismal performance their stock shot up by 11%, and the company’s market cap went up by nearly 2 billion. How is this possible? Because Wall Street stock brokers don’t care about short term losses. They are betting on Zillow because of revenue growth, not profit growth. Last quarter, more consumers took the bait and Wall Street believes in the long term, Zillow can become a real estate monopoly. Great for Wall Street, bad for consumers.

Results summary:

Zillow reported a Q3 2018 Homes Segment loss of $16 million. Awful! 

Zillow reported a Q3 2019 Homes Segment loss of $87.8 million. Much worse!!

Zillow Offers

On November 21, 2019 Zillow’s CEO, Richard Barton, gave an “interview” on CNBC

It was less of an interview and more of an infomercial on his newest foray into home flipping. In it, he in-artfully claimed that low housing inventory was the result of a difficult home selling process. The ridiculousness of the claim was hilarious and Barton almost fell off his chair laughing as the words left his mouth. The “reporter” managed to stay on script and seized on the opportunity to tee up Zillow Offers. Barton then gave his billion dollar, cheesy, bandit-flipper sign pitch. Here it is: Dear Home Seller, you know you want what I’m offering, you are frustrated because it’s painful to sell your home, you want to get rid of price and time uncertainty. I’m here for you. Zillow Offers will make all your dreams come true.

The Truth

The Zestimate is flawed: Everyone by now has heard of Zillow’s home valuation algorithm the Zestimate. Few, however, have read the fine print on their website. The nationwide accuracy according to their own data has a dismal error rate for off-market homes of 7.5%. Let’s put this in perspective. The median home price in the U.S. is around $230,000.00. Applying Zillow’s own math, a seller’s perceived value in an Instant Offer on a 230k transaction could be off by as much as $17,500.  

That’s more than twice the required down payment for an FHA loan on a purchase of the same price. Who would give that kind of money up for “convenience”?

The stakes are high: It’s not hard to sell a home using a licensed Realtor. What’s hard is getting every single penny possible out of the sale. For most people this is the single biggest and most important financial decision in their lives. They need an expert by their side. Someone who is bound by a code of ethics to put their needs first. Someone who is trained and experienced in selling homes in their exact market. Someone who can articulate the specific differences and unique features that can quickly add up to tens of thousands of dollars – dollars that will be used for the next purchase, or to pay off debt, pay for a wedding, college, or support retirement. The bottom line is this. Do you want to trust the valuation and sale of your single biggest asset to a marketing company who is buying your home, or do you want to trust a local expert with a fiduciary duty to protect you?

A Better Way

Zillow Vs. Realtor Graphic

A Realtor is a professional who spent over 100 hours in specialized training, faced a battery of state-mandated test questions, was fingerprinted, background checked, is bound by a code of ethics, and pledged an oath to put their clients’ needs above their own. A Realtor has mandated continuing education standards, and pays for a variety of specialized tools to help inform them of market values. They are provided state-certified documents proven to fairly articulate the intentions and responsibilities of all parties in a real estate transaction. They are supervised by brokers who are held accountable for every action taken on behalf of a client. Finally and most importantly, if you want to take a quick cash offer, for a lower price, a good Agent can get you one!  

6 Fun Facts About Zillow Offers

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