In 2018, when Zillow announced that they were jumping aboard the iBuyer bandwagon with Zillow Offers, they had hoped that their brand and technology would be enough to make them the authority in the space. Three years later, however, Zillow’s lack of human market intelligence and dependence on their flawed Zestimate model paved the way for a half a billion write-down and shuttering of Zillow Offers.
While the Zillow iBuyer service was not profitable enough to justify its existence, it revealed many things about the market. Consumers saw value in the iBuyer service, and the market embraced the business model. So, what can real estate and mortgage professionals learn and apply to their business?
What Two Lessons Can Real Estate Agents Learn From Zillow’s iBuyer?
Many agents and mortgage professionals are gleefully rubbing their hands together after Zillow’s announcement that they will be closing their iBuyer service. The memes are coming in thick and fast! While some of them are hilarious, too many people, say, “I saw that coming,” rather than focusing on the lessons learned from the failure.
Even though Zillow has not found success in this part of their business, Fintech companies are moving into the real estate industry with increasing speed. While Zillow iBuyer had many flaws, many sellers were listing their homes on their system. Zillow offers were often much lower than a house could get if they went to market, and there were three main reasons for this:
1. Consumers value convenience
2. Consumers did not like the traditional process
3. Consumers have and continue to have a low view of the value of Agents
They’re not pretty truths for people in the real estate industry, but they are truths agents and mortgage lenders need to be aware of if they want to stay in business.
The Value of Convenience
Technology is progressing every day and making everyday tasks easier or more convenient. People can buy anything they want without leaving their home and so it was not surprising that technology was created to make listing a house as easy as ordering a pizza. While there were some flaws to Zillow’s iBuyer service, it is easy to see why it was so popular with people selling their house; it removed the time-consuming elements, like:
• Finding real estate professionals
• Hosting open houses
• Property chains
Even when it became clear that the Zillow offers were low, it was still worth it for buyers to avoid a lot of the frustration of selling their home.
Consumers Do Not Value Real Estate Agents or the Traditional Process
The fact that buyers would rather pay more upfront AND lose money on their house to avoid working with real estate agents is a clear indication of our crappy public perception! Reality shows with cocky, fast-talking agents are partly to blame. But equally to blame are the overt displays of wealth and bluntness that are rife within the real estate industry.
For most people, buying or selling property is the most significant transaction they will make in their lifetime. It is a lot of money, which is why both buyers and sellers will be nervous. But, it is also a very emotional transaction. They are buying a home they will fill with memories or raise their families. They may be selling grandma’s house where their childhood heights are marked on the walls, and there is still a stain on the carpet where they knocked over grandma’s perfume. For these buyers, a computer service is preferable to dealing with a real estate professional who displays a lack of empathy or patience.
Suppose your real estate or mortgage company is compassionate and caring and does everything possible to make your clients’ lives easier. In that case, that is something you can highlight in your marketing to humanize what you do. These are the two most significant pain points for the real estate industry as a whole; so big that consumers are willing to leave a lot of money on the table.
What Opportunities Are There For Agents Now That Zillow Has Closed Its iBuyer Service?
If you follow enough real estate professionals on social media, you will have seen memes spreading like wildfire and many people saying they said back in 2018 that Zillow could not produce a local realtor. While it is humorous among other real estate professionals, taking a critical stance will not help your reputation with potential clients.
Instead of being critical of Zillow and crowing about their failure, take this opportunity to educate potential clients. Explain why Zillow can never compare to the expertise of a real estate professional when getting someone the best price for their home. Discuss the benefits of working with a local realtor or a local mortgage advisor. Share what effect iBuyers have on the local housing market. Taking this as an opportunity to educate potential clients will help you stand out from other real estate professionals and show that you are different from the negative image of agents they hold.
Use your platform to highlight why a local real estate or mortgage professional knows the market better than software. Explain that things often go wrong when someone is buying or selling a house, and working with a real estate or mortgage expert means that you can quickly get the sale back on track. Not only that, but having a professional on your team will help you avoid the common real estate pitfalls in the first place. That is not a feature that any of the iBuyer technologies have.
Another thing that many consumers do not realize is that while they may be able to sell their house quickly using services like Zillow’s iBuyer, doing so will harm the local real estate market. Selling to investors means fewer homes available for couples looking for their first home or retirees looking to downsize. The increase in investments can create microbubbles and drive up housing prices in local areas so that they are no longer affordable for local residents.