Should We Be Afraid of iBuyers like Zillow?

Should we be afraid of iBuyers like Zillow? Have you have heard the crazy news about Zillow Offers, which is owned and operated by Zillow.  The popular real estate website, that makes near-instant cash offers on homes – a practice known as iBuying? Zillow basically buys the house online directly from the seller, slaps on paint, makes a few repairs, and then turns around and sells it. Many of us in real estate and mortgage lending was starting to worry this could create an unfair market advantage.  Zillow could buy multiple homes in a particular area and then manipulate or artificially inflate home prices. To be fair, Zillow and Redfin have issued statements denying this.

The experiment has failed as Zillow, the country’s 2nd largest iBuyer in the country, has shut down its home-buying operations. At the end of the 3rd quarter, Zillow reported it had lost $420 million and had to lay off 25% of its workforce, about 2000 people, right before the holidays. Effectively ending their attempt at flipping homes using their famed technology coined “Zestimate,” aka the estimate of a home’s market value. 

What is the point of all this, and why is it so important to me? Selling and buying real estate is a relationship business. Having been in mortgage lender for almost 20 years now, it always comes back to relationships. Home selling should not be an automated process in my opinion. We need to remember this is someone’s most significant asset in most cases, and they should be working with a local, professional, reputable realtor, not a Zillow robot. 

Zillow went against this model, and it failed. I have been telling clients and referral partners my stance on Zillow for years – not a fan, as you can imagine. Still, they have become a necessary evil for many of us because of their market share and advertising dominance. Personally, I hope this recent fail on their part is a wake-up call for the masses – Get back to being local and build the people and business around you, in your own neighborhoods! I know we all love Amazon, but I am begging we don’t go down that road with the Zillows of the world. Let’s bring this back to the relationship piece, based on real people, with actual knowledge of your area.

Should we be afraid of iBuyers like Zillow? Now, there is still an opportunity for institutional buyers where that “iBuyers” platform might be the right path. But let your realtor, the professional, guide you on all your options and be part of this decision-making process. The seasoned agents I work with every day, take California law and their fiduciary duty to heart; they are genuinely there to give you helpful advice and counsel.