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...
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."