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Will Technology Change the Role of Real Estate Agent?

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Technology has impacted the way people find homes, research neighborhoods, and compare prices; in essence, buyers are able to get much of the initial legwork done by sitting at their computer or scrolling on their smart phone.  Nevertheless, when it comes to actually buying a home, about 90% of buyers still use a hired real estate agent to help them with the actual offer and contract negotiations according to a report released by the National Association of Realtors.

In an article published by Forbes, its noted that “… buyers and sellers can get to the “one yard line” without much help. But deals rarely get done unless an agent is acting as middleman.”  Real estate agents, without a doubt, add value with their professional expertise and negotiating experience.  However, the sticking point for many is the large piece of the sale that the agents get for their commission.  In many cases, the seller pays a total of 6%, with the buying and selling agent getting 3% each. 

The concept of direct sales, hasn’t yet taken over the real estate market and certainly hasn’t made real estate agents obsolete; in fact, realtors may skip showing homes whose sellers aren’t willing to pay the 3% commission.  Yet, technologically based real estate companies are still searching for ways to compete with the current real estate agent.

Case in point, companies such as Opendoor, you simply “type your address into Opendoor’s website, submit a few photos, and it will make you an offer within a couple of days. No open houses, negotiation, or waiting months for the buyer to come up with the money. In fact, the average closing time from the first offer is less than 20 days,”  according to the article written by Stephen McBride. Some experts believe this type of business could change the way people buy and sell houses and the agent’s role in the transaction.

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Zillow Expanding Zillow Offers Program

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Zillow has been expanding the services it offers to both home buyer and sellers.  In select markets, the company began a program called Zillow Offers.  In the Phoenix, Las Vegas, Atlanta, Charlotte and Denver areas, homeowners are able to “request a no-obligation cash offer from Zillow to buy their home. If they accept it, Zillow directly buys a seller’s house, prepares it for showings and quickly lists it for sale”, according to an article published on HousingWire.com.

The program was only launched nine months ago and according to the president of Zillow, Jeremy Wacksman, there has been a demand from homeowners to launch Zillow Offers in additional geographic markets.  Wacksman states, “It’s clear people want a convenient, stress-free way to sell their home, and real estate professionals are eager to work with us to leverage Zillow Offers as a way to build their local businesses.”  As a result, Zillow Offers will be expanding in 2019 to Miami, Minneapois, Nashville, Orlando and Portland.  Additionally, the service is going to be launching in even more cities by the fall of 2019. 

With this expansion, Zillow expects to not only work with local real estate agents and brokers, paying commission to local agents, but also promote Premier Agent, which helps connect sellers and listing agents when a seller has decided not to move forward with a Zillow Offer transaction.

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Zillow’s Instant Offers: Should We Be Concerned?

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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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Photo Credit: http://401kcalculator.org

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Zillow Estimates Under Fire: Website Responds with a Contest

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Earlier this year, a Chicago-land home owner and real estate attorney filed a law suit against the website Zillow. She felt the home estimate quoted on the popular real estate website was significantly lower her home’s actual value.  Further, she argued, it was deterring buyers and irresponsible of the website to publish unreliable information.  “If it’s not reliable, you shouldn’t put it out there,” she stated in references to the website “Zestimates”.

Zillow emerged on the web about eleven years ago and has about 171 million virtual visitors a month, according to an article published in the New York Times, written by Nick Wingfield.  The market values quoted on the site are calculated using algorithms that factor in common appraisal data such as the home’s square footage, location, recent home sales and tax assessments.  According to the New York Times article, the site has an error rate of about five percent.  Although down from the earlier error rate of 14 percent in Zillow’s earlier years, the error rate is still not satisfactory for many home homeowners who feel it is affecting their ability to sell their home at its true value.

Zillow believes there is room for improvement as well.  Last week they announced that they are not only open to suggestions but willing to pay for the best idea.  The “Zillow Prize” is $1 million dollars and will be awarded to the party able to present Zillow with the most improved algorithm.

To read the entire article and get more info on how to get in on the competition for the million dollar Zillow Prize, click here.

 

 

Photo Credit:  Blue

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