Last week I mentioned the problems with agents selling houses before inputting their listing onto the MLS (link here). Agents are so accustomed to doing it that there isn’t much hope it will change, at least not until an outsider puts an end to it (district attorney or disrupter).
The listings that are first exposed as ‘Coming Soon’ suffer a similar fate.
Zillow has legitimized the practice with their whole-hearted endorsement, yet the listings are vague and unclear, except for the On Market date. But even that doesn’t have any rules, and agents regularly ignore their own declaration and never put them on the open market at all (probably because they found a buyer from their Coming Soon campaign), or delay for a few extra days in hopes of a big pay off.
For these agents, the MLS-input is a last resort.
Rarely do the listing agents who offer a property as ‘coming-soon’ have a specific strategy, and they tend to be vague about showings and offers.
What can be done?
If the ‘Coming Soon’ had more parameters, it would help. Rather than just a future on-market date, let’s add two other questions:
1) Are you showing the home before the on-market date?
2) Are you entertaining offers before the on-market date?
Just those two questions would not only give buyers and their agents direction on what to expect, but also it would create some accountability. Because there are no rules currently, it’s anything goes, which isn’t good for buyers or sellers.
Are there clues for detecting the listing agents who do this stuff? The trail of evidence starts with their photos of the front exteriors of their listings – it is against the MLS rules to include a photo with your for-sale sign, so those who insist get their sign fuzzed out by the MLS police:
Obviously, the photo-taking happens before MLS-input, so if they already have the sign in the yard for their photo, you know they have been shopping for buyers for days, if not weeks, prior to MLS-input.
But most agents are happy to tell you that they will not only conduct a ‘Coming-Soon’ campaign, but they also have a their database of ready buyers, and an office full of productive agents who have their buyers too – all of which will be exhausted before they put your home on the MLS.
What is best for the sellers – and buyers too – is for everyone to engage at the same time, via the MLS, for maximum urgency.
They paid $410,000 and are listing for $425,000? Are they expecting a bidding war? By the way, OpenDoor has 300 listings in Phoenix already!
Hat tip to daytrip for sending this in – an excerpt:
Noel Levine, a freelance IT consultant and self-described geek, said he looked into other online services like OfferPad and OpenDoor, which the new Zillow program competes against. He was thinking about listing the house with a broker when he saw an article about the Zillow Instant Offers expansion in the local newspaper. Zillow was able to accommodate the quick turnaround. The deal started with a request for an offer on May 3 and closed 15 days later, at a purchase price of $410,000.
“So in two weeks I went from having a house to put on the market to being out of the house with money in the bank,” Levine wrote in a thank you note to Zillow that he shared with GeekWire. “It spared me from having to go thru the trials and tribulations of wondering how many showings it was getting, then wondering if I should accept an offer, to dealing with the inspection deductions to worrying about what could go wrong with the closing.”
The home is now listed on Zillow with a priced at $425,000 (the Zestimate is $414,233). It boasts “real wood flooring, travertine tile, and stacked stone accents,” according to the listing. The company bets that buyers will love the “cozy gas fireplace” and “master retreat.”
Zillow is setting up their home-flipping business in Phoenix and Las Vegas, which are two very safe towns for taking a risk.
The vast majority of houses there are easy-to-value tract homes, and relatively inexpensive compared to the coasts. But Zillow’s stock price has plunged 10% since they announced their new venture.
In this cnbc article, Mahaney makes a good point. Having skin in the game will assist Zillow to better gauge and predict market conditions. When we still hear the typical market nonsense from N.A.R., Zillow could become the voice of real estate – if they’re not already:
In May 2017, Zillow announced the launch of Instant Offers, which enables home sellers in the Las Vegas and Orlando test markets to get cash offers from potential investors on Zillow’s platform. The company said homeowners prefer the process, and that most of them who requested an Instant Offer ended up selling their home with an agent.
“Home sellers welcome a hassle-free experience selling your home without decluttering your garage or taking the kids out of the house,” Rascoff said.
Rascoff said the company will take on collateralized debt to purchase the homes, and hopes to have between 300 and 1,000 homes held for sale by year’s end. He called the move “industry friendly,” benefiting buyers, investors and agents. He also said it could help stimulate the real estate market and open up new inventory for prospective buyers.
“There are people that are basically stuck in their home that would love to go buy another home, but can’t sell,” Rascoff said. “This could provide the ability to unstick people from their homes.”
Mahaney said that it will help Zillow test how much the real estate market is turning.
“This is an interesting experiment on the company’s part,” Mahaney said. “They’ve reached the point of scale with both real estate agents and with consumers. There are data points in the market that suggest this way of buying and selling homes is really starting to gain traction.”
The program will start this year in Phoenix and Las Vegas. Zillow didn’t say when it will expand into other markets.
I doubt any of the corporate flippers will ever come to the high-priced California coastal markets – with fewer tract homes and high cost, it’s too risky.
Whoever spends the most money on advertising will win, and Zillow spends around $100,000,000 per year. Who can keep up? In the video he says that 90% of the home sellers chose to hire an agent, rather than sell to Zillow:
Nearly one year ago, Zillowshook up the real estate industry when it announced that it was getting into the home selling business by launching “Zillow Instant Offers.”
In the program, homeowners looking to sell their home in the test markets of Las Vegas and Orlando are able to get cash offers for their home from selected investors interested in buying it, all within Zillow’s platform.
As it turns out, that was just the beginning.
Zillow announced Thursday that it will begin buying and selling homes directly to and from homeowners.
To repeat, Zillow itself will soon be buying homes directly from sellers, then turning around and reselling them.
According to Zillow, the program will start small and test in two markets, Las Vegas and Phoenix.
But the program represents a huge change in the business model for Zillow. Back in 2015, Zillow CEO Spencer Rascoff said that the company views itself as a media company, not a real estate company.
“We sell ads, not houses,” Rascoff said at the time. “We’re all about providing consumers with access to information and then connecting them with local professionals. And we do a great job of giving those local professional high-quality lead, they’ll covert those leads to at a high rate and then want more media impressions from us. So we’re not actually in the transaction, we’re in the media business.”
But that’s not the case anymore.
Now, Zillow sells ads and houses.
According to Zillow, its homebuying program will roll out “this spring” in Phoenix and Las Vegas.
The company said that home sellers in those markets will be able to compare an agent’s comparative market analysis to offers directly from Zillow or from other investors.
Zillow says that it when it buys a home, it will make the “necessary repairs and updates” and list the home “as quickly as possible.”
Now, what appears to make Zillow’s direct buying program different from companies like Opendoor and OfferPad is that it does not cut real estate agents out of the process.
According to Zillow, a local agent will represent Zillow in the purchase and sale of each home, which will enable agents to earn commission on the purchase and sale.
Not only is now the best time to hit the market, their research shows it is ideal to sell early in the listing period:
According to earlier research, the largest number of home shoppers will see a given listing within its first week on the market, and it’s important to capture that early interest as quickly as possible in order to boost the chances of a quicker sale.
Zillow started their ‘Coming Soon’ feature in the summer of 2014, so by now the gimmick is maturing. Agents have worked every angle of it, and consumers have seen it all too. Everybody comes to their own conclusions.
Here’s how one consumer described it to me yesterday:
Interesting tactic. Post a ‘Coming Soon’ sign for two weeks and then drop it on to the MLS when it doesn’t sell.
Makes me immediately think the price is too high. Couldn’t get it sold as a “Coming Soon”, so now trying the traditional way.
It looks over priced especially after the pictures.
The listing agent could have been playing it straight and was really holding back all buyers until the house was ready, but who would know? The consumer’s conclusion is that it must be over-priced – is that in the seller’s best interest?
Consumers have never been so skeptical of agent tricks, and are jumping to their own conclusions. Because agents don’t define their Coming Soon strategy, the rest of us just assume there is none, or the agent is just shopping for his own buyers before MLS input.
A tactic like this burns up any urgency there might be for the home – the necessary ingredient for it to sell for top dollar. Buyers don’t feel the need to step up because the house isn’t on the open market. Then once the listing is inputed onto the MLS, those who saw the failed Coming Soon campaign are rewarded for their patience – and will likely wait longer.
The ‘Coming Soon’ campaigns are good for one thing:
The listing agent occasionally pocketing both sides of the commission, while ignoring their fiduciary duty to their sellers.
This post was generally positive about Zillow’s future, but a commenter left this remark about Zillow puffing their counts:
Interesting that you repeatedly quote ‘according to management’ – did it cross your mind that Zillow management exaggerate performance with over stated Average Monthly Unique Users?, or how they use EBITDA instead of GAAP for earnings so that $114M of share based compensation is excluded?
The 152M ‘Average Unique Users’ in Q4 reported by Zillow is substantially overstated compared to 83.2M MUU’s reported by Comscore (http://bit.ly/2G7Zc6V). Even Zillow admits they duplicate MUU’s with the following statement buried in the SEC Form 10-Q Filing:
“Measuring unique users is important to us because our marketplace revenue depends in part on our ability to enable real estate, rental and mortgage professionals to connect with our users, and our display revenue depends in part on the number of impressions delivered to our users. Growth in consumer traffic to our mobile applications and websites increases the number of impressions and clicks we can monetize in our marketplace and display revenue categories. In addition, our community of users improves the quality of our living database of homes with their contributions, which in turn attracts more users.”
“We count a unique user the first time an individual accesses one of our mobile applications using a mobile device during a calendar month and the first time an individual accesses one of our websites using a web browser during a calendar month. If an individual accesses our mobile applications using different mobile devices within a given month, the first instance of access by each such mobile device is counted as a separate unique user.”
“If an individual accesses more than one of our mobile applications within a given month, the first access to each mobile application is counted as a separate unique user. If an individual accesses our websites using different web browsers within a given month, the first access by each such web browser is counted as a separate unique user. If an individual accesses more than one of our websites in a single month, the first access to each website is counted as a separate unique user since unique users are tracked separately for each domain. Zillow, StreetEasy, HotPads, Naked Apartments and RealEstate.com (as of June 2017) measure unique users with Google Analytics, and Trulia measures unique users with Adobe Analytics (formerly called Omniture analytical tools)”.
Another interesting aspect of Zillow is how a handful of Investors control 60% of the shares and even when Executives dump huge amounts of shares the share price goes up. Are these investors acting in concert with the executives? so that there are buyers in the market knowing that executives are bailing out? Take a look at the major institutional investors and consider how easy a stock like Zillow can be manipulated by relatively small purchases in the market.
Finally, Zillow is a consistently Loss Making business with $443M in accumulated Losses in the 6 years since its IPO and losses of $149M in 2015, $107M in 2016 and $94M in 2017. Put that in context of Facebook making a massive investment in Real estate and Redfins growth substantially higher than Zillows and you have to question the long term viability of Zillow whose business model is to incrementally increase costs greater than the additional revenue generated.
Full Disclosure: I am a Zillow cynic who takes issue with Zillow imposing inaccurate Zestimates on millions of homes and refusing all reasonable requests to correct the erroneous valuation despite fundamental flaws in the proprietary Zestimate algorithm.
Dough sent in this change in his zestimate of his Carlsbad Aviara tract house – almost a quarter-million increase in the last 30 days! The accuracy of the zestimates haven’t been getting any better, but think of the influence this could have on sellers and buyers!
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