In April, real estate information company Zillow announced it would begin testing the direct purchase and sale of homes. The move is a new feature of Zillow’s Instant Offers program, which helps connect homeowners with real estate investors willing to purchase their property with cash and skip the process of preparing a home for the market and listing with an agent.
Starting in the Phoenix and Las Vegas markets, the first venture into the direct purchase and sale of real estate expands Zillow’s reach when it comes to being a part of the transaction process (Orlando, Florida, is also testing Instant Offers, but not direct purchase). Now, not only can Zillow help market a property and help people find a real estate agent, but the company is also connecting sellers with buyers directly and even becoming a player in the transaction.
But Zillow isn’t the only real estate site getting into the direct purchase and sale of houses. National brokerage Redfin has also been dipping its toes into the role of real estate investor with Redfin Now, currently purchasing homes in the San Diego and Inland Empire markets in Southern California. And other online real estate companies like OfferPad have built their businesses around the model of direct purchase from the buyer.
For Redfin and Zillow, the relationship with homebuyers and sellers is changing. They’re no longer serving only as a source of information or as your agent; they're now becoming the individual on the opposite side of the deal as well. And with the goal of investing in a home for profit in mind, a deal directly with a major real estate site can be a risk for both sides, like any investor transaction.
“Real estate companies have rarely smoked their own dope – it’s one thing to say we have an algorithm to tell you how much your home is worth. It’s another thing to buy the home based on that algorithm,” says Glenn Kelman, CEO of Redfin.
Before you opt for an expedited home sale, however, it’s important to understand when it is and isn’t in your best interest.
Sitting at the Other Side of the Table
Kelman says a major concern of delving into real estate investment is the potential to change the relationship between the company and consumer. “We’re being careful because we want to make sure we’re always on the consumer’s side,” he says.
To avoid appearing as competition in the eyes of consumers looking to gain from the sale of their home, both Zillow and Redfin seem to be treading carefully with their purchases, trying not to scam sellers while also avoiding bad investments for themselves.
To do this, the Redfin Now program connects interested homeowners with a Redfin agent at the same time the company appraises the property. Similarly, Zillow Instant Offers connects inquiring homeowners with local real estate agents to determine the difference in sale price should they choose to list with an agent instead of the fast-track sale option. Homeowners can inquire about the program, or they may be contacted if they've expressed interest in selling and their home appears to fall in the midlevel value range. At that point, Redfin will send a professional to appraise the property and put together a report. Additionally, a Redfin agent will weigh in on the possible profits from a market sale so the homeowner can compare the two options for selling.
“That choice and that transparency has been really appealing to a lot of consumers,” says Jeremy Wacksman, chief marketing officer for Zillow.
For Mark Stark, CEO of Berkshire Hathaway HomeServices for Arizona, California and Nevada properties, providing multiple options for the homeowner is a key part of moving toward the best possible transaction for both sides. Berkshire Hathaway HomeServices is part of the Zillow experiment, with some experienced sales executives providing their insight and services should the homeowner find listing the property a better scenario.
“When people focus solely on discounts for the consumer, they’re basically trying to speak for the consumer instead of asking the question of what’s most important to you,” Stark says.
When the Market’s Right
The relationship between real estate sites and the consumer isn’t the only factor to consider, but you must also take into account if the market allows for both parties to see a solid profit at the same time. In tight seller’s markets – currently the case for many parts of the U.S. – real estate investors don’t see as much of a profit because they have to purchase the property for more to begin with.
“We’re trying to buy these homes as close to market value as possible,” Wacksman says. “It’s really about if you don’t want to go through the prep work and the process yourself.”
Because there’s often little room for error to profit, both Wacksman and Kelman note direct purchase is still in the testing phase, with Zillow and Redfin trying to determine if they are able to provide the option of a quick cash sale to consumers and still profit.
“Is every city in America open to this model? We’re not sure, because … we’ve discovered that higher-price coastal cities are pricing houses above where institutional purchase makes sense,” Kelman says.
Stark expects platforms like Zillow Instant Offers to be able to take on the cyclical nature of real estate markets, both on a local and national level. “Once they get down the process, they can take that process virtually anywhere, and it can get a colder, warmer, medium scenario based on the market they’re in,” he says. Zillow's direct purchase of property is only part of the Instant Offers program, which is in itself a smaller part of the overall Zillow platform. As a result, Zillow can afford to make an offer only when it appears to be a solid investment, and such investments may be more lucrative in different parts of the country at different times due to the cyclical nature of real estate.
You can never go wrong exploring all your options for selling your home, including investor offers – whether that’s from a local company or a major real estate site. Here are four scenarios when you may want to consider selling your home to an investor directly without marketing it first.
You’re in a time crunch. You may be relocating to another part of the country or across the globe, or debts may have piled up. If your ability to relax financially hinges on selling your current home and being able to move on, the slight decrease in sale price may be worth selling to an investor.
You can’t buy a new house until you sell. When the market is particularly tight and homes on the market are few and far between, offloading your current house first can make buying a little less stressful. When you’ve already liquidated your biggest asset, you can make an offer faster and with fewer contingencies, which can help beat out competing buyers for your next house.
You can’t make updates to your house. Especially if you’ve lived in your house for a long time – we’re talking decades – there’s a good chance some updating is in order to get the maximum price when you sell. But that’s not always possible when that updating includes gutting the kitchen and landscaping the yard. If the difference between an investor’s offer and the price an agent plans to list the house for doesn’t bother you, there’s no need to for the extra stress.
Your market’s low on buyers. If you live in a part of the country where the seller’s market seems to have passed, selling to an investor may be the best option for you. Especially if your home fits in your market's mid-to-low price range, an investor’s purchase may be worth more than the higher price you’ll get only after your house sits on the market for six months. Always factor in what your time and effort is worth compared to the difference in prices.
Ensure a quick sale.
Selling your home quickly not only allows you to move on with your life, it also means fewer days of keeping your home in pristine condition and leaving every time your agent brings prospective buyers for a tour. According to real estate information company Zillow, the best time to list a home for sale is on a Saturday between May 1 and 15; homes listed during those times sell six days faster and for 0.7% more than the average annual home price. But how fast your home actually sells, and at what price, depends on factors beyond timing. Here are 10 secrets to selling your home faster, no matter when you list it.
Updated on March 20, 2020: This story was published at an earlier date and has been updated with new information.Pick a selling strategy.
Pick a selling strategy.
Before putting a for sale sign in your yard, it's important to pick the selling strategy that will work best for you. The for-sale-by-owner option may be best if you feel confident in your ability to market the home and negotiate. If your time is better spent on other details, a real estate agent could be best. If you need to sell the home quickly, you may want to inquire with an iBuyer, an entity that can make the deal close faster than the typical homebuyer. You should feel confident in the selling strategy you choose, and avoid switching from one to the other while your house is on the market. Buyers could be turned off by the constant changing of circumstances.Invest in a professional photographer.
Invest in a professional photographer.
According to NAR's 2019 Profile of Home Buyers and Sellers, 44% of recent buyers started their search online. Of those, 87% found photos very useful in their home search. If your listing photos don’t show off the features of your home, prospective buyers may reject it without even taking a tour or going to the open house. Hiring a professional photographer and posting at least 30 photos of your home, inside and out, is a good way to attract buyers. Photography is often free for home sellers, as shoots are often conducted at the expense of real estate brokers as part of marketing the property.Clean everything.
(People Images/ Getty Images)
Nothing turns off buyers like a dirty house. Hire a company to deep clean if you can’t do it yourself. “When the (home) is on the market, no matter what time of day or night, it should be clean and neat,” says Ellen Cohen, a licensed associate real estate broker with real estate brokerage Compass in New York City.
Key places to clean while your home is on the market include:
- Kitchen countertops.
- Inside cabinets and appliances.
- Floors and room corners where dust collects.
- Bathroom counters, toilets, tubs and showers.
- Inside closets.
- Windows, inside and out.
- Scuffed walls, baseboards and doors.
- Basement and garage.
Depersonalize the home.
Remove all your family photos and memorabilia. You want buyers to see the house as a home for their family, not yours. Remove political and religious items, your children’s artwork (and everything else) from the refrigerator and anything that marks the house as your territory rather than neutral territory. The same goes for any collections such as figurines, sports memorabilia or kids' toys that can make a buyer think less about the house and more about you. Family photos can be replaced by neutral art or removed entirely – just be sure to remove any nails and repair nail holes where any hanging photos used to be.Let the light in.
Let the light in.
People love light and bright, and the best way to show off your house is to let the sunshine in. Open all the curtains, blinds and shades, and turn lights on in any dark rooms. If the natural light situation is lacking in any room, strategically place lamps or light sources throughout to set the mood. And while your house is on the market, open all curtains and turn on lights every time you leave your house for work or errands in case you get word that a buyer would like to tour the space before you get home.Be flexible with showings.
Be flexible with showings.
Buyers like to see homes on their schedule, which often means evenings and weekends. Plus, they want to be able to tour a home soon after they find it online, especially in a hot market where they're competing with other buyers. If your home can be shown with little or no notice, more prospective buyers will see it. If you require 24 hours’ notice, they may choose to skip your home altogether. "That's one less person who gets to see the property," Cohen says. Be ready to leave quickly as well – if you're still cleaning up or hanging around outside when the buyer arrives, it can make for an awkward interaction.Set the right price.
Set the right price.
No seller wants to leave money on the table, but the strategy of setting an unrealistically high price with the idea that you can come down later doesn’t work in real estate. Buyers and their agents have access to more information on comparable homes than ever, and they know what most homes are worth before viewing them. A home that’s overpriced in the beginning tends to stay on the market longer, even after the price is cut, because buyers think there must be something wrong with it. "Pricing correctly on the lower side tends to work much better," Cohen says.Remove excess furniture and clutter.
Remove excess furniture and clutter.
Nothing makes a home seem smaller than too much big furniture. Rent a self-storage container or a storage unit and remove as much furniture as you can. It will immediately make your home seem calmer and larger. Remove knickknacks from all surfaces, pack them away and store the pieces upon which you displayed them. Take a minimalist approach to books, throw rugs and draperies, and clear off your kitchen and bathroom countertops, even removing appliances you normally use. If you can scale down the contents of your closets, that’s even better, because it makes the home's storage space look more ample.Repaint in neutral colors.
Repaint in neutral colors.
A new coat of paint will do wonders to freshen up your home, both inside and out. This is the time to paint over your daughter’s purple bedroom, nix the quirky turquoise bathroom and cover up the red accent wall in your dining room. Busy wallpaper can also turn off potential buyers. Your goal is to create a neutral palette so buyers can envision incorporating their own personal touches in the home. "You just want people to see the space for what it is," Cohen says. Rather than a stark white, consider neutral shades of gray, taupe and cream on the walls.Spruce up the front of your home.
Spruce up the front of your home.
You’ve heard it 100 times before, and it’s still true: Curb appeal matters. You don’t get a second chance to make a first impression. A new or freshly painted front door, new house numbers and a new mailbox can breathe life into your entryway. Fresh landscaping and flowers in beds or in pots also enhance your home’s first impression. Trim trees and bushes, tidy up flower beds, remove dead leaves from plants, clear out cobwebs from nooks near the entrance and pressure-wash walkways, patios and decks. Leave the outdoor lights on, too, because prospective buyers may drive by at night.Here are 10 tips to sell your home faster:
Here are 10 tips to sell your home faster:
- Pick a selling strategy.
- Invest in a professional photographer.
- Clean everything.
- Depersonalize the home.
- Let the light in.
- Be flexible with showings.
- Set the right price.
- Remove excess furniture and clutter.
- Repaint in neutral colors.
- Spruce up the front of your home.
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at email@example.com.