Zillow Is Buying Houses Again With ‘Zillow-Backed Offer’ Power-Buying Pilot

September 23, 2022
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Zillow is once again buying houses.

However, the portal company has not come back off the ropes to re-enter the iBuying market at the worst possible time. It has instead launched a new product which uses its own capital to give prospective homeowners a 'Zillow-backed' cash offer.

The new 'Zillow-backed offers' product is being soft launched in Denver and Raleigh (also the two markets where Zillow is piloting its intriguing 'post-pay' model) for properties worth up to $750,000 with a 5% minimum down payment.

The process for buyers is...

  1. The buyer is pre-qualified via an online form on Zillow's site.
  2. They are then contacted by a Zillow Loans officer to talk financing and get pre-approved.
  3. They are then partnered with a participating local agent who helps them navigate the process.
  4. The buyer shops around and can make a cash offer backed by Zillow's own capital.
  5. From the date of the closing, the buyer has 90 days to secure financing. If they can't, Zillow charges another 0.5% and the buyer has the option to buy the house back from Zillow.
  6. If the buyer still can't secure the funds after a second 90-day period, Zillow can sell the house on the open market.

Zillow-backed offers has clearly been designed to drive leads for Zillow's struggling Mortgage division. Users pay Zillow a 0.5% fee for the service if they use Zillow's in-house Home Loans lender or 2.5% if using a different lender.

 

Since its ignominious exit from iBuying in November 2021, speculation has been rife that the Seattle-based company would look to so-called 'power buying' to offer its users alternatives to home ownership. The service offered is similar to those offered by the likes of specialist companies Knock and Flyhomes as well as new age mortgage companies like Better.

So-called power-buying is growing popular in the American market where an increasing number of companies are offering services around cash offers, buy before you sell and guaranteed home sales to lower the barriers for people looking to buy and sell in a competitive market.

Zillow claims that cash offers are two times more likely to be accepted by sellers and that buyers offering cash can offer 4% less than those with pre-approved mortgage offers.

The move into power-buying has predictably generated plenty of scorn from many U.S. agents who have concerns that the tech giant is encroaching on their business. One user on the popular reddit forum r/realtors commented that "Zillow is, has and will continue to make money off of agents and did you see that 2.5% fee if the buyer shifts to a different lender? Wow. Zillow isn't anyone's friend."

September 23, 2022
Edmund got to know the world of portals and marketplaces working at Mitula Group (which became Lifull Connect after the buyout in 2018). He worked directly with hundreds of portals across the world in his role in the content department for three and a half years before transferring to the SEO department to understand the inner workings of listings sites. He joined Online Marketplaces as Head of Content in March 2020.

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