Zillow is no longer just an online platform for browsing available homes or for creeping on the value of your neighbor’s house. In recent years, the company has also begun actually buying, fixing up and selling homes itself through a new division called Zillow Offers — a major shift in its business model.
On Thursday, the company announced a new feature aimed at streamlining the process for homeowners considering selling to Zillow.
For certain homes, Zillow’s “Zestimate” — the online estimate of the home’s value — will now represent an initial cash offer from the company to buy the property. That could mean an even quicker timeline for homeowners looking to close a sale without going through the hassle of a formal listing, or a source of helpful data for would-be sellers who want to know how much money they’ll have to buy their next house.
For Zillow (Z), this new feature is just the latest step in transforming itself from a hub for online real estate data to what it’s calling “Zillow (Z) 2.0,” a one-stop-shop for home searching, buying and selling. Zillow (Z) also offers connections to nearby real estate agents, as well as home loans.
“This is all about taking those steps toward more of that one-click nirvana,” COO Jeremy Wacksman told CNN Business. “(It’s about) making the real estate transaction experience more seamless, more easy, more integrated.”
Zillow Offers has been around since 2018 and is now available in 25 markets around the country, ranging from Tampa, Florida, to Fort Collins, Colorado. Typically, homeowners in those locations can submit a questionnaire and, in some cases, photos of their homes, and will receive an initial cash offer from Zillow within several days. With the new Zestimate cash offer feature, eligible homeowners can skip past that process.
From there, the transaction works the same as with other Zillow Offers — a Zillow employee inspects the home, provides a list of needed repairs and an adjusted final offer and the homeowner can pick a closing date. Zillow charges sellers a fee of about 7.5% on average.
Zestimate initial cash offers will be available in 23 markets to start. For a growing set of properties in those markets, Zillow has enough data on the home and others like it that it feels confident making the Zestimate its initial cash offer, Wacksman said. For example, if you live in a neighborhood where all of the homes are similar and many have recently been sold, Zillow would have an easier time determining an accurate Zestimate for your home.
The real estate world has sometimes criticized Zestimates and other online home value estimate tools for not representing the true market value of a property. But Zillow says its pricing algorithm is reliable. For homeowners who decline Zillow’s cash offer, the difference between Zillow’s offer and what they end up selling for is typically less than 1%, Wacksman said.
“Our goal is to make market value offers and get the Zestimate exactly right for what your home is worth,” he said. “And then we take on the selling process if you don’t want to do all that work yourself.”
Zillow’s home buying and selling business has grown rapidly since it was launched just over two years ago, but it’s not yet profitable. In 2020, the segment brought in $1.7 billion in revenue, but posted a loss of more than $320 million. But Wacksman said the company is more focused on growing the business than turning a profit at this point, trying to scale it to where Zillow can cover fixed costs and grow profit margins on each home and the adjacent services, like mortgages.
“We’re still in investment and growth mode,” he said. “(Right now), we are attempting to break even on each unit … we’re trying to make market value offers for what it costs us to buy and sell homes.”