The ibuyers are borrowing money like crazy to build their inventory of homes to flip. Opendoor doesn’t have the brand-name awareness of Zillow, so they are advertising a lot and buying homes directly off the MLS. Zillow has everyone’s email address so they are able to reach their users directly. Both have been fairly well-compensated during the 12-month frenzy – will it continue? From this article:
Opendoor Technologies Inc., which buys homes from consumers and lists them for resale, is in talks with lenders for a new revolving credit facility of roughly $2 billion, according to people familiar with the effort.
The company, which is rapidly accelerating the number of homes it purchases, plans to use the proceeds to help increase acquisitions, said one of the people, who asked not to be named because the matter is private.
A representative for Opendoor declined to comment.
Opendoor, led by Chief Executive Officer Eric Wu, pioneered a data-driven spin on home-flipping known as iBuying. After the company buys a home, it makes light repairs and seeks to resell it, profiting by charging sellers a 5% fee for the convenience of an easy sale.
The company acquired 8,500 homes in the second quarter, more than double the number it bought in the first three months of the year, according to an statement Wednesday. It also had roughly 8,100 additional houses under contract at the end of June.
Opendoor uses debt to fund acquisitions, and had just under $4 billion in borrowing capacity under existing revolving credit facilities as of the end of June. The company had drawn $1.8 billion on those facilities, according to a filing.
Zillow Group Inc., Opendoor’s main competitor, has also moved to increase its firepower for home purchases. The company borrowed $450 million through a first-of-its-kind bond offering earlier this month.
Zillow’s recent activity has been more consistent than Opendoor’s, so let’s look at the Zillow numbers to see if the convenience they offer sellers is paying off. Zillow currently owns 138 homes in San Diego County, and of those, 72 are active listings and 38 are pending. They have sold 48 homes this year – here are the 13 they have closed since July 1st:
List Price on the Flip
They have a consistent 2-month turnover between the day of purchase, and the day of sale, so it’s a quick $553,600 profit, or an average of $42,585 per sale – though they had to pay out close to half of that in buyer-agent commissions (all fix-ups are included in their purchase prices). It’s a good thing that sellers aren’t in a hurry – Zillow is currently six weeks behind in responding to purchase requests.
Sellers are leaving some money on the table, but as long as Zillow is flipping every home, buyers will still have the same amount of inventory to consider – it’ll just be at a higher price.
It’s probably no surprise that a well-branded company that spends $100 million per year on advertising has made an impression on the consumer. On the other hand, agents are independent contractors running around hoping to sell a house. The impression that leaves on consumers isn’t always great.
I have suspected that consumers rely on their zestimate more than we’d like to admit.
It’s been around for ten years, so it’s familiar and easy. Because there isn’t any other internet tool like it, homeowners follow their zestimate and fantasize about their equity position – and start believing. Zillow sends regular reminders which reinforce that there might be something to it.
When I’m talking to sellers, if my price is different than the zestimate, I better have a good explanation. Likewise, I don’t mind when the zestimate is above my list price. If buyers happen to believe in the zestimate’s accuracy, then it helps make my listing look like a deal.
But the truth is that the zestimate is wildly inaccurate and heavily manipulated by Zillow to suit their own needs – especially in their quest to buy homes from coast to coast.
A good friend has been contemplating the sale of this home in Santa Monica. We have watched the zestimate rise steadily over the years, and once it touched $8,000,000, we thought it would be a good time to put it on the market and hope the zestimate would help propel the sale.
As we prepared to launch the listing, I monitored the zestimate closely:
June 16th Zestimate
The zestimate had gone up $362,339 in the last 30 days, and was well into the $8,000,000s. We planned to list for $6,950,000, which would have looked very attractive, relatively.
The next day, our zestimate got revised.
June 17th Zestimate
Whoa – it dropped $3,284,879 in one day???
We had committed to at least conducting some price discovery, so we listed for $6,950,000 on June 22nd.
What did Zillow do?
They changed the zestimate to the EXACT list price,
They suggested a sales range evenly around the list price
They erased the history of the $3,284,879 drop from five days prior:
June 22nd Zestimate
The zestimate went from $8,195,161 to $4,910,282 to $6,950,000 in less than a week.
You’d be crazy to trust anything they say.
It was the erasing of the previous drop that is the most disturbing – which they have done for years. If you drop $3 million in one day, then stick with it – don’t recreate history just to make yourself look better.
Our listing in Fire Mountain is back on the market.
The buyers, who according to their agent were in love with the house and the price, decided to cancel because of what they found out about the city restrictions. The City of Oceanside won’t allow short-term rentals because the driveway is only 20 feet wide, instead of 24 feet wide. Long-term rentals are fine.
Though the short-term rentals are controversial and we really can’t predict their future, it was enough for the buyers to say no – they didn’t want any unusual restrictions that could possibly affect their kids’ future once they take over the house. The buyers had planned to live there for the duration.
We are getting an assist from Zillow – their zestimate has gone up nicely since we hit the open market:
Here’s the zestimate from the day before the listing was inputted:
Because Zillow is buying homes in the area, it helps them to keep their zestimates artificially low. If they were legit, and kept the zestimate at the lower amount even though the list price was substantially higher, then fine – that’s your opinion. But when it fluctuates with the list prices, it’s a sham.
Because there is so little information available, the consumers rely on anything they can find, and the zestimates are the best-known valuations available – even though they can change by $400,000 in a day.
They are happy to buy your house for the amount of their zestimate, which in this fast-moving market can only mean that sellers are leaving money on the table – it’s just a matter of how much. But sellers – who have been cocooning more than ever – may not have a feel for the real estate business or the differences between agents and who just want quick cash will likely jump at their offer to purchase.
Zillow has opened up as a brokerage as well.
They are masterful at blurring the distinction too, because they are still very dependent upon realtors spending billions to advertise on Zillow. But check out their latest video that encourages home sellers to call Zillow, and if it weren’t for the broker ID at the 0:33-minute mark (for three seconds), a viewer would think that this sale was handled by a Zillow agent.
Commercials like these are building their brand as the go-to destination for home sales.
It will just be a matter of time before they replace their partner agents with their own licensed employees to process your paperwork.
This week we heard the the news that homes.com was acquired:
Homes.com has a similar business model to massive real estate website Zillow, at least as far as Zillow’s core business goes. Homes.com is a property listing portal that helps agents and brokers market properties. The platform supports more than a half-million agents and brokers, and the website receives about 5 million unique visitors each month in the form of buyers searching listings.
For the time being, Homes.com is a much smaller business. Zillow’s real estate platform received more than 200 million unique monthly users in the fourth quarter of 2020 and was visited 2.2 billion times altogether. And Zillow has a rapidly growing business of directly buying and selling homes, while Homes.com is solely a home search platform. What’s more, keep in mind that CoStar is buying Homes.com for $156 million — Zillow’s market cap is about $34 billion.
However, it’s not just Homes.com anymore. Once it’s brought under CoStar’s umbrella, it will join forces with brands like the LoopNet commercial real estate marketplace (an area where Zillow doesn’t operate), Apartments.com, Apartment Finder, and most importantly, the Homesnap real estate agent workflow software business.
Homesnap is another recent acquisition, purchased by CoStar in December 2020. The Homesnap platform offers a marketing platform for agents, and CoStar plans to take advantage of the combination with Homes.com. As CEO Andrew Florance said in the press release announcing the acquisition, “Our plan in bringing Homesnap and Homes.com together is to help agents market their listings in support of the ‘your listing, your lead’ philosophy — which stands in contrast to most players in the industry.”
Can any home-search portal keep up with Zillow? They would need to spend the big bucks on advertising like Zillow does, just to be in the running. Zillow already has the name-brand recognition, a huge lead in monthly visitors, and they have the killer instinct and willingness to spend big on advertising – including key product placement. Displaying their for-sale signs in their ads will further establish them as a national brokerage in the mind of the consumer:
With the rollout of vaccines against COVID-19, 70% of homeowners in a recent Zillow survey say they would feel mostly or completely comfortable moving to a new home when vaccines are widely distributed — and 78% of homeowners who say widespread vaccine distribution would impact their decision to move say such distribution would makes them more likely to move.
“We expect that the vaccine rollout will likely boost inventory, as sellers become increasingly willing to move despite COVID-19 — resulting in greater numbers of new listings beginning this spring,” says Chris Glynn, principal economist at Zillow. “That injection of inventory could give buyers more options and breathing room in a competitive market. The vaccine, however, will also likely add to already-strong demand, given that most sellers will become buyers as they trade in for a home that better suits their new needs.”
Zillow research shows that 63% of sellers are also buyers. And, as buyers, they have specific reasons for selling. A recent Zillow survey shows that homeowners who are thinking of selling in the next three years have a variety of reasons for doing so.
Additionally, 26% want to live closer to family, 24% wanted out from being responsible for yard work, 14% say their family or household is getting larger and 13% say they can no longer afford their home.
Nearly 40% of homeowners who are considering selling within three years (39%) say they think they’ll get a better price if they wait. They’re not necessarily wrong — although waiting comes with tradeoffs, according to Zillow economist Jeff Tucker.
“Potential sellers are likely correct that home prices have yet to reach their peak,’’ Tucker said, “but in the long run prices tend to rise, so there’s no clear ‘right time’ to sell.”
The catch, he said, is that waiting to sell may raise the cost of trading up to their next home if mortgage interest rates rise.
This isn’t the type of environment that you should put much stock in your latest zestimate.
A month ago, on March 3rd, the zestimate was $1,336,035.
Today, on April 4th, it is $1,723,510.
Zillow wants you believe that their zestimates are within 1.9% of being right. But if you would have sold this home to them for the latest zestimate amount, you still would have left $100,000+ on the table.
Let’s go around the horn with the automated valuation models.
Zillow says that their zestimate is within 1.9% of being right on price with the on-market homes, which sounds really good until you realize what that means.
Their zestimates of the OFF-MARKET homes are way off – especially in this market:
Once we listed for $1,599,000, they kept their zestimate at the $1,336,035, but after we received six offers that were all over list price and accepted one at $1,770,000 – and raised the price accordingly – then Zillow bumped their zestimate by $352,658:
You sure you want to sell your house to them for the off-market zestimate?
Redfin said they didn’t have enough information to generate a value when they saw my initial $1,599,000, but then they came around once the list price was raised to $1,770,000:
The other automated valuation models aren’t any better, but at least they don’t cheat:
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!