How Zillow’s “Instant Offers” Feature is Changing the Real Estate Game

How Zillow’s “Instant Offers” Feature is Changing the Real Estate Game

Zillow's "Instant Offers" is causing an uproar on Wall Street; real estate community is shocked.

Shortly after the first quarter of 2017, the real estate giant Zillow released its “Instant Offers” feature. This feature allows homeowners to link directly with investors through Zillow and make all-cash offers for properties. The release of this feature sent shockwaves throughout the entire industry, as the traditional listing model can now be foregone.

Sellers and buyers who take advantage of this feature no longer require the services of a realtor, which in turn angers the latter. Traditionally, realtors take around 6% of the property sale price as a commission, which is then split between the buyer’s and seller’s respective agencies. With “Instant Offers,” one can go in and present an all-cash offer with just a click of a button (assuming they are approved on the platform). Realtors nationwide see this as a sudden threat to their sales pipeline, and the NAR (National Association of Realtors) has even started petitions calling to stop this service.

On the other hand, investors on Wall Street have diverging sentiments over this new feature. Since the start of June, Zillow’s market cap has gained a whopping $1.75 billion totaling $9.32 billion. While it cannot be asserted if this “Instant Offers” feature single-handedly led to the 20% growth, the advent of the feature signaled innovation in an otherwise stagnant field. Zillow’s model is sophisticated on many fronts, as consumers can use built-in comparative market analysis tools when making their bids. Investors see Zillow as pushing the needle in the real estate industry, and the “Instant Offers” program could set a dangerous new precedent.

With all that being said, the majority of consumers still are not financially capable of presenting an all-cash offer, so panicking realtors need not go into a sudden frenzy. All-cash offers account for less than 1% percent of the total market share, and this practice is risky in nature. The services that realtors provide are valuable, and the systematic “buy-it-now” strategy that Zillow is trying to employ is dangerous to consumers. Purchasing property is often the biggest investment that a consumer makes in their life, and Zillow’s “Instant Offers” feature is trying to forego this process.

At the end of the day, though this feature has sparked interest in investors, it is somewhat detrimental to consumers. Impulsive buying doesn’t go hand in hand with such an expensive purchase as a house. Realtors help facilitate the home buying process, all the while providing valuable insight to consumers. Real estate agencies won’t go out of business in the nearest future regardless of the extent of technological innovation.