Zillow, Seriously?

Zillow just announced that it’s going into the house flipping business. Wall Street loves the announcement. The stock is up more than 23%. 

But you know me. I have questions. 

The first question has to do with its current business. As far as current users are concerned, Zillow does three things: It tells you what your current home is worth, it helps you find a new home, and it tells you what the homes you’re looking for are worth.

Does this new business line support the current business model? How credible is a Zerestimate® if you know it comes from a company that wants to make money by buying your home?

They may be able to walk that line. It’s hard to know. But I’ll tell you this, there’s a good reason car dealers aren’t in the business of valuing used cars –– they leave that to Kelly Blue Book. 

But let’s assume the new business line doesn’t devalue Zillow’s current business line. How exactly does this new venture work?

Presumably, I go onto Zillow and see that my house is “worth” $400,000. Then I contact Zillow to get an offer. Do they offer me $400,000? 

If so, Zillow buys the house from me and then what? Reprices it at $440,000 in order to sell it at a profit? If that’s the case, how can Zillow justify the new value? Oh, I know. Maybe Zillow is also getting into the home rehab business. 

Another scenario is that Zillow offers me less than they say my house is worth –– say $375,000. Then they can sell it for what they say it’s worth and clear a profit. As a consumer, I’m not sure why I would take their offer, unless I need to move or (more likely) I know something disadvantageous about the house that Zillow doesn’t –– it’s built on an ancient Native American burial mound, for example. Or that the gas station a block away has been poisoning the soil. Or that the foundation is crumbling. The electrical is a fire hazard. The roof leaks. The tree in the back yard is likely to fall on the house. The place next door is a meth lab. 

Or how about this scenario: Zillow intentionally undervalues homes so it can buy them up on the cheap, then ascribes a higher value to them in order to make a greater profit when it sells them. This one strains plausibility. For one thing, Zillow isn’t the only option out there for determining the value of a home. For another, can you imagine the lawsuits? 

Other than the new CEO, nobody knows exactly how this is supposed to work. But I will tell you this. I’m not too worried for my job. 

Want a legitimate valuation for your home? You can reach me by phone at 310 854 2458 or at my very fancy new email address, BrianYourFavoriteRealtor (at) gmail (dot) com.