Zillow Offers is Going Away. What does that mean for the “Cash for Homes” Market?

by Nov 25, 2021

There has been a lot of attention recently about Zillow Offers exiting the cash-for-homes market.   Although Zillow has been a huge presence in this market, their exit does not mean the end of the market itself.  Local companies like Quality Homes Reimagined (QHREI) have also been offering this convenient option to their customers and continue to do so at great benefit to both Buyer and Seller.

So, what happened with Zillow and why is that not happening with local companies like Quality Homes Reimagined? To answer this question, it is important to understand the cash-for-homes process and, its application by large national companies versus that of smaller local companies.

What is the Cash-For-Homes Process?

This process is exactly as it sounds: a cash offer for the purchase of a property.  At Quality Homes Reimagined, we pay cash for homes, in just about any condition. The appeal of this type of home-buying is multi-faceted.  For the buyer, the purchase price is often a bit under full market value, which gives room financially for the buyer to make renovations to the home after purchase before reselling it or using it as a rental property. The Buyer then stands to make a profit because the renovations that bring the home to today’s standards force the appreciation of the home.  

In exchange for accepting a slightly discounted sales price, the seller eliminates the expense of repairs and maintenance issues. They also avoid the frustration and expense of listing with an agent and the associated fees for the realtor, the hassle of showings, property cleanup, inspections, appraisals, and other related costs. The seller also eliminates the chance of an offer being withdrawn because of funding or personal issues with the intended buyer.  In addition, with a cash-for-home transaction, the buyer will work with you on your timeline.

Where Zillow Went Wrong

When Zillow came on the cash-for-homes market in 2018/2019, they were correct – there was enormous potential and a huge client base for this service. What they did not lend enough weight to, though, is educating themselves on how to make a fair offer that is a win-win for both the homeowner and the buyer. Their businesses relied on their inaccurate property value estimates (zestimates). In addition, they did not take into account accurate rehab costs, closing costs, lending/holding costs and, their slim margin for profits. These are all important numbers to take into account when making a cash offer.

Zillow CEO Rich Barton, in explaining why this venture failed, said, “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”

When Zillow purchased vast quantities of properties nationwide, they did so when property values were rapidly rising. As with any investment, though, timing is vital. When the market started to slow this summer, Zillow’s purchasing did not.  This left them with thousands of properties that they could not sell for what they paid, much less for any margin of profit, and the company lost millions.

Why are Local Companies Not Floundering?

So why are we not seeing the same problems with smaller, local companies like Quality Homes Reimagined?  Smaller local companies take the time, money, and effort to fully educate themselves on the local trends, the needs in those areas, and the fluctuations of the local real estate market.

Smaller, local companies, are not trying to amass a huge portfolio of properties.  They are offering a service to their local areas and, improving their communities with increased value and usability of the properties they procure.  Along with creating local jobs and rejuvenating neighborhoods.

If you looking for an easy way to sell your property and want an all cash offer or, are open to selling on terms, contact Quality Homes Reimagined for a free, no-pressure, no obligation consultation.

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