Zillow Group is expanding its Zillow Offers home buying and selling program to Denver, its fourth market overall, but the first one on the higher end of the price scale.
The program, which allows homeowners to request an offer directly from Zillow, debuted in its first market of Phoenix in April. While the first few Zillow Offers markets have median home prices somewhere in the $200,000s, Denver is a much costlier city with a median home value of $414,700, according to Zillow. Denver has started to show up on lists of the most unaffordable housing markets in the country, though it is still a long way from the troubles in San Francisco and New York.
When the program formerly known as Instant Offers kicks off this fall in Denver, some homes will have a big button on Zillow that says “get an offer.” The seller fills out a short questionnaire and sends in a couple photos. About 48 hours later, Zillow comes back with an offer and an agent to work with. The seller and Zillow set up a call to walk through the offer and schedule an inspection. Then Zillow sends a revised offer after seeing the house. If both sides are happy with the situation, the seller signs forms digitally and picks a closing date. Zillow takes care of the rest.
Contractors working for Zillow undertake small renovations to prepare the home for sale. Zillow works with local agents — in Denver, the partners will be 8z Real Estate, Berkshire Hathaway HomeServices Innovative Real Estate and RE/MAX Alliance — to list and sell the homes.
The move into direct home sales marks a risky bet, but one that CEO Spencer Rascoff says could be especially lucrative. Rascoff explained the company’s pricing strategy in Zillow’s most recent earnings call, saying that right now, the focus is on volume rather than making a bundle on each sale. At the beginning, the company just wants to come out ahead on homes with the expectation that the margin on each sale will rise as the business grows.
For 2018, Zillow has said it expects to hold an inventory of 300 to 1,000 houses related to the new Homes financial reporting segment, from which it expects $125 million to $255 million in new revenue.
As of two weeks ago, Zillow had yet to complete a sale, though the company noted it had several homes under contract to be sold. At the time, the company had less than 10 active listings and about a dozen more coming online soon. We’ve asked Zillow for the latest on these figures and will update the story when we hear back.
GeekWire profiled the first home purchased and offered for sale by Zillow, a four-bedroom, two-bathroom house in the Phoenix suburb of Chandler. The original asking price of $425,000 has dropped twice — to $418,500 and then $415,000 — and the house is still listed as for sale on Zillow’s website.
Zillow’s entrance into direct buying and selling of homes makes what was already a competitive market even more crowded. Another Seattle real estate heavyweight, Redfin, jumped into the market last year. Opendoor in June reeled in $325 million in fresh funding, a few weeks after Offerpad landed a $150 million debt and equity round.