For Sale by Zillow refers to an article (paid) on Inman News last week that describes something called The Zillow Effect.
In the article, the author explains how his aunt, a busy professional, wanting to sell her home quickly, bypassed the entire real estate industrial complex and managed to seller her home in three days for over asking price. No real estate agent. No For Sale sign. No 6% commission. And how did she pull of such a feat: Zillow.
Maybe you think she needed a professional home stager and photographer to take beautiful pictures to find a buyer. No such hassle. She simply used the photos that were still there from the last time the home sold. Maybe you think she needed a professional appraiser to help her set the asking price. Nope. She just used the value Zillow suggested (called a Zestimate). She used the existing photos, updated the description, used the Zillow recommended asking price and flipped the status switch to “Active.” Three days, above asking price, no commission. And what did Zillow charge her for her trouble: NOTHING.
The article goes on to explain the home that sold was in Portland, which is a particularly hot real estate market right now. That makes perfect sense. In a hot real estate market homes practically sell themselves, which begs the obvious question: why would anyone pay a real estate agent 6% commission in a hot market when you can pay Zillow nothing?
The article also speculates that “she probably would have gotten more for her property had she listed with an agent.” I am not sure that is true.
In an article published in 2008 by the National Bureau of Economic Research entitled Do Real Estate Brokers Add Value When Listing Services Are Unbundled, what the researchers found was that other than the benefit of access to the MLS, “a seller’s use of a broker reduces the selling price of the typical home by 5.9 – 7.7 percent, which indicates that agency costs exceed the advantages of brokers’ knowledge and expertise by a wide margin.”
In simpler terms, what that research finds is that other than the benefit of using the MLS to advertise a home for sale, real estate brokerage services costs more than they are worth. All that expertise results in a LOWER selling price. In other words, not only did she save the 6% commission, she most likely sold her home for MORE than what she would have with brokerage representation.
What is Zillow but the modern day version of the MLS. It enables home sellers to advertise a home for sale to buyers. And if the only true benefit of hiring a brokerage to sell a home is access to an advertising platform, and sellers no longer need that platform to advertise their home for sale, do they really need the brokerage services at all anymore?
Buyers and sellers can find each other today for free, without the MLS and without a real estate brokerage. It is only a matter of time before home sellers realize that the 6% brokerages are just not worth the money—especially when using them results in a lower sales price.
Home sellers can find their own buyers and come to an agreement on price without help from anyone today. What they need are transactions managers: real estate professionals, who work on an hourly rate, and make sure the transaction goes smoothly. Who will be the first one to fulfill this latent market need? You better hurry. It soon may be the only position available in an industry that is in desperate need of change.
To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.