At the end of May, Zillow dropped a major bombshell on the real estate industry by enabling “Instant Offers” in select locations. The value of the new feature is clear, but there’s plenty uncertainty and anxiety amongst Realtors® regarding the potential consequences. It’s important, though, to understand what Zillow Instant Offers actually is before you decide how you feel about it.
What are Zillow Instant Offers?Initially set up as a two-city test, Zillow Instant Offers launched in Las Vegas and Orlando to allow sellers a choice between an all cash transaction with investors or to work with an agent to sell their home. A group of 15 private investors who are either brokers themselves or work with a third-party broker, will have the opportunity to make cash offers on homes that sellers submit to the Instant Offers program. At the same time, a Zillow Premier Agent will have the opportunity to submit a CMA and share the value they can provide. Sellers will choose between the two.
Why Did Zillow Launch This Test?Like every other company in the real estate space, Zillow is looking for ways to make more money and help consumers. In this case, they’ve created an option to streamline the selling process for some homeowners. They also connect agents with more sellers. This may be at the crux of why Zillow began this program – if agents who advertise on Zillow realize there’s another way to gain credible leads, more agents may sign up to be a Zillow Premier Agent. Considering agents make up 70 percent of Zillow’s revenue, this is a fairly safe bet.
Does This Make Zillow a Broker?The other question asked “Is Zillow getting in the middle of the transaction?” With Zillow testing Instant Offers in Nevada and Florida, by those state laws, Zillow is not acting as a broker. Because the company (currently) receives no compensation from the sale of real estate, they aren’t required to have a brokerage license. The other key point is that during this test, Zillow actively encourages sellers to work with an agent. The process for a seller to accept an offer leaves them with three choices:
- Accept the cash offer and sell directly to the investor
- Accept the cash offer and work with an agent to manage the transaction
- Reject the cash offer and work with the agent who provided the CMA (or any agent they want)
How Do Zillow Instant Offers Work?The process is designed to be quick and practically painless, but it does involve a few steps, according to Inman News.
- The seller goes to Zillow and signs up for the Instant Offers program. They have to provide photos of their home, information about the details, and disclosures – not unlike they do when they meet with a listing agent.
- The description is sent to the investors participating in the program in order to put together an offer.
- A local Zillow Premier Agent also receives the description for the CMA they’ll do
- Both the investors and the agent have 24 hours to submit their offer/CMA. Any offer a seller receives is good for five days.
- Zillow calls and emails the seller to encourage working with an agent.
- The offers are managed by dotloop. The entire transaction is electronic.
- Both the offers from the investors and the CMA includes a breakdown of the fees so sellers know exactly what they’ll pay and what they’ll net.
- If a seller decides to move forward, they choose between the three options mentioned earlier.
- The investors can have a home inspection if they want one. Inspections are expected to be completed within 24 hours of the agreement being reached between the seller and agent.