Many home owners and those shopping for homes are familiar with the popular real estate website Zillow.com. It provides information on not only homes for sale, but estimated values of homes, called “zestimates”, based on a combination of factors. These zestimates have recently come under fire; nonetheless, Zillow has begun to introduce a new feature, “instant offers”, and some real estate professionals are sounding warning alarms.
In an article published in LinkedIn by Greg Hague, “Zillow’s Secret Plan”, concerns about Zillow’s business model are detailed. Specifically, Hague warns that the instant offers will most likely come from real estate investors looking to purchase a home at a below market value, only to turn around and sell for a profit. Further, the seller will have to pay a hefty service fee that does not include professional services such as appraisers, attorneys and real estate agents.
Hague summarizes that ultimately, Zillow is “…trying to commoditize real estate so that homeowners sell to online investors who then sell to retail buyers. If that happens, millions in homeowner equity will be transferred into the pockets of middleman institutional investors. The big winners will be these firms’ shareholders.”
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