[prepend]

The problem seems to be that any homeowner getting an offer from Zillow would immediately know they had mispriced their listing and not accept.

Unless Zillow has some new efficiency that no one else has (super contractors that can fix up cheaper than other investors, low cost capital) I don’t know how they will be able to outbid the market consistently as there aren’t enough dumb sellers with dumb agents out there.

But maybe I’m missing a way how they could use analysis to identify “bargains” without the seller getting clued in and upping their price.

[pyoung]

I mentioned this elsewhere, but 'closing certainty' is a real concern in the real estate market, to the point where many sellers will take a lower offer price in favor of a cash buyer.

[matte_black]

I never understood why though, in the worst case doesn’t their house just take a bit longer to sell if a deal falls through? Aren’t there backup offers in play? Is taking a lower offer really better than just waiting a bit more for the higher offer?

[pyoung]

As an example (real-world) a seller turned down a few early under-list-price cash offers, and eventually got an at-list offer from a mortgage buyer. But the buyer ended up having trouble finalizing the loan and as a result it took almost two months to close. The home had already been sitting on the market for over a month, so had the deal fallen through, the seller may have had to put it back on the market, which could have added a few more weeks at best, and a few more months at worst to the process. So had they gone with the cash buyer right away, they would have sold the home in a few weeks after listing it. But instead it took a few months, and there was a non-insignificant chance that it would have taken a few more. And during this time, the seller was not living in the home, so presumably they were paying rent/mortgage on two homes. For some people that could be tough to swing, and not worth an extra 5-10% on sales price.

A few other things to consider. 1: The above example was in a relatively hot market. But in a more 'normal' market, homes can sit on the market for months at a time before attracting a good offer. So in a lot of markets, waiting for the next offer could mean months at a time. 2: There is a bit of a 'stigmatization' around properties that fall out of contract, because a common contingency is an inspection contingency, so the theory is that buyers start to shy away if a home falls out of contract because they are worried it is a lemon. I have personally seen a few listings where the realtor will explain the contract failure in the top of the post (i.e. buyer couldn't get a loan or something like that) as a clear attempt to ward off the 'lemon' concerns. And because mortgage buyers usually require a long list of contingencies, the risk of a failed contract is a lot higher than cash buyers. So cash buyers are 'safer' in that sense. 3: Sellers are often rolling over the proceeds of a sale into their next house, so any extra money on their home sale will most likely show up as a slightly lower monthly payment on the next house. So for every extra $10k you will only see about $50 lower on your next monthly mortgage payment (assuming 30 year).

[krallja]

Here’s an example reason why someone might take an earlier offer: A new job starts July Nth. It’s now mid-April. The family needs to be moved before July. They don’t have a lot of months left to close a deal.

[matte_black]

But how often is a seller so motivated?

Could Zillow use some combination of data from data brokers to find out how motivated a seller really is and then take them for as low as they can go?

For instance you’re selling a home and I see your job has changed on LinkedIn and your home hasn’t sold yet.

[ap3]

It’s about risk mitigation.

There is value in certainty.

It’s why a $100 now is worth more than a pronise to pay in the future

[matte_black]

A low priced home isn’t always a mispriced listing. It could be a fucked up home that’s super beat up and no one wants to touch. Or a seller that wants to get out immediately.

[prepend]

I meant low priced relative to value. In your example, Zillow wouldn’t want it either because it wouldn’t turn a profit. Unless they had some super efficient repair crew.