Real estate listings platform Zillow says it’s planning to buy and sell homes in the Las Vegas and Phoenix areas as part of a major change to its business model.
The company is working with Berkshire Hathaway and Coldwell Banker to make offers on suitable homes, before selling these to buyers. Zillow will pay commissions and also “make necessary repairs and updates and list the home as quickly as possible.”
Zillow is calling the new program “Instant Offers”, and says it will help provide agents with an opportunity to acquire new listings by hooking them up with motivated sellers who’re taking direct action to sell. The way it works is that interested homeowners can offer to sell their home to Zillow directly. They simply submit their home for consideration, and after a review Zillow will make what it believes is a fair offer to buy that property.
“Across all testing, Zillow found the vast majority of sellers who requested an Instant Offer ended up selling their home with an agent, making Instant Offers an excellent source of seller leads for Premier Agents and brokerage partners,” the company said in its announcement.
The announcement is a big change for Zillow, which mainly acts as a hub of information on properties for sale. By buying and selling homes itself, Zillow is taking on significant costs and risks, which may help to explain why its share price fell by 7 percent on the news. Clearly, some investors are averse to this increased risk.
Nonetheless, Zillow said it was optimistic that the new model would prove to be successful after extensive testing carried out in the last year.
Zillow CEO Spencer Rascoff later told CNBC that the company was “ready to be an investor in our own marketplace”. He said Zillow has a major advantage as it has unique access to a “huge audience” of sellers and buyers.
The move puts Zillow in direct competition with a site called Opendoor.com, which operates a similar business model, buying properties and readying them for the next buyer.