What's happening with Opendoor, Zillow, and Real Estate Agents?

August 10, 2022

What's happening with Opendoor, Zillow, and Real Estate Agents?

If you are a real estate agent, this concerns you. This concerns consumers too, but these are my interpretations, from a real estate agent’s standpoint, based on what’s happening in the industry.

Opendoor and Zillow recently announced their partnership, and we’ve been hearing some feedback from consumers and real estate agents.

I want to show you the history Zillow has had in the world of buying and flipping properties and selling properties directly to consumers. And I want to show you, in my opinion, why we should be concerned with Zillow doing this.

Opendoor and Zillow partnership announced

According to MPA, “The company recently announced forming a multi-year partnership with Opendoor Technologies that will enable home sellers on the Zillow platform to seamlessly request an Opendoor offer to sell their home.

“Opendoor offers will be available on Zillow, and customers will be able to use the service as a standalone offering or package it with other Zillow home shopping services like financing, closing, and agent selection.”

We all know that when it comes to online home searches, Zillow controls the internet. That’s their most, actually it’s their only, profitable business in 2021, and they are good at generating good leads.

MPA quotes Jeremy Wacksman, Chief Operating Officer of Zillow. He says, “We know choice is important for customers, who can make the best decision when they see all of their selling options up front – including selling on the open market with a Zillow Premier Agent partner and getting a cash offer from Opendoor.”

They also took a statement from Andrew Low Ah Kee, Opendoor’s President, and this is what he says in the article: By bringing together Zillow’s market-leading audience and Opendoor’s e-commerce platform, more consumers will have the option to sell to Opendoor and save themselves the stress and uncertainty of a traditional sale process.” (Source: MPA)

To me, that is like a subliminal message telling consumers that (1) the “traditional” process sucks–to be fair, it is a difficult process, but it is fair to all parties involved, and “stress” is relative to the agent you are working with; and (2) all agents suck, and that’s why the consumers need their partnership’s services.

HousingWire says, “Opendoor on Wednesday also announced the launch of a new product called ‘Exclusives,’ which [is] an Amazon-like marketplace where homes are listed on Opendoor 14 days prior to being listed on the MLS.”

I want you to pay attention to this one, whether you are a real estate agent or a consumer. In most of the US, real estate agents are not allowed to market homes off-market.

“The properties listed on the platform are on a first-come, first-serve basis, eliminating bidding wars and price negotiations. Prospective homebuyers can reserve and fill out a contract for the home entirely online,” HousingWire adds.

I think that is interesting. It is also worth noting, especially for consumers, that Opendoor won’t be paying for the real estate agents, they are passing that expense on to you, the buyer.

Pay attention, real estate agents!

You see, all these big companies like Zillow are telling us agents that “We’re for you. We’ve got your back. We want you to win.” It’s bull. Let’s face the facts and look at how they act. These big companies compete against us and make it more difficult for consumers to go to the agents, even though marketing says that going to them will make it a lot easier to buy or sell their properties.

In an interview with CNBC in 2019, Richard Barton, the CEO of Zillow, talked about his plans for the company. Here’s the summary of what he said:

This was before they failed with their iBuyer program, and now they’ve teamed up with Opendoor. Zillow’s CEO is basically saying, “You don’t need an agent.”

That’s what they want to do. They’ve been really adamant about it.

Look, for those of you buying Zillow leads, no problem. I've been buying Zillow leads for years, and I love them—they’re great [leads]. Just remember to go in with your eyes open, knowing that they are out to take you out. Or at least take a massive portion of your commission.

Don’t buy the crap that these big companies are there for you—they’re not. At least, that’s not what their actions tell us. At the end of the day, it is the bottom line that they answer to.

Zillow’s History

In a Fortune article back in June 2022 titled "Zillow’s $6 billion home flipping business was a disaster," Now, a cooling housing market could foil its comeback plan, they said. “This [lead generation] aspect of Zillow’s business has never been the sexiest part of what it does. After all, lead generation has been around for decades, going back to telemarketers and even door-to-door salesmen. But its financials might get you going: In 2021, the division that includes lead gen was the company’s second largest—and the only profitable portion of its balance sheet.”

They are making money from us agents. In fact, it is the only positive money they have. We’re funding all of their other experiments, which is no problem. The leads do work. We have to give them credit where it’s due. Their leads are pretty good leads. But don’t buy the crap that they’re going out and saying “we’ve got your back” (to real estate agents)—it’s not like that.

Fortune continues, “By spring of 2021, the market had overheated to a point where Zillow’s much-lauded algorithm, the backbone of its home-flipping strategy, was struggling to make accurate pricing predictions. Believing its own inflated numbers, say analysts, the company began overpaying for homes all across the country.”

Regarding the Zestimate, this is what Fortune says, “Zillow’s trigger-happy algorithm didn’t hurt just the company: As Zillow paid top dollar for homes across the country, it likely helped to bid up prices amid a stretch that we now know to be the hottest in the U.S. housing market’s tabulated history.”

Over the last two years, 30% of all properties sold were bought by these big companies and investors like Zillow.

Opendoor’s record–Consumers, pay attention

This is the complaint filed against Opendoor, from FTC. It says, “Opendoor transaction data confirms that consumers who sold to Opendoor have lost money compared to what they would have received through a traditional sale. Opendoor’s data shows that as of February 2020, the average resale price of its homes was [redacted]. However, consumers received only [redacted] on average due to Opendoor’s lower offer prices, deductions for repairs, and fees. If those consumers had instead sold on the market for the price Opendoor received on resale, they would have thousands more in net proceeds, even if they had paid the nine percent Opendoor claimed they would pay in agent fees, seller concessions, and overlap costs, and paid [redacted] for repairs.”

It is an open document. You can download it and read it.

This is the reality…

As agents, this is what we’re going up against. We’re going up against Opendoor and Zillow, and yes, Zillow owns the internet when it comes to home searches, and Opendoor does a very good job in this process. But at the end of the day, we've got to call it for what it is—they just want to make more money. They want to get in the middle of every transaction to take more and more.

They aren’t on the consumers’ side either.

They are not approaching it from a point of altruism like they are saying (“We want to help agents. We want to really help the consumer.”) This is what pisses me off—they should just say, “Hey, we want to make more money, and we think we can do it this way. Along the way, we’re going to make things better, and we’re going to work with some agents. We’re only going to work with the agents that pay us. They’re going to be Zillow Premier agents. If you can’t afford it, it’s fine, but we won’t work with you.”

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This is how some agents are responding to this. Saul Klein, one of the leading agents, says this in a Facebook post on August 5th: “They are scrambling. Look at the margins, market caps, and the multiples of these companies (and other major brokerage brands) and you begin to see a deeper pattern. If you can't make money in a blazing hot market, time to look at other options.”

Zillow and Moody’s housing market predictions

This is what Zillow is predicting about the real estate world, and why they are saying that it is a great opportunity to buy low, hopefully without including an agent, and if we do, then we’re going to take a piece of it and everything else. According to a Fortune article on August 4th:

“Not only does Zillow disagree with the “home price correction” narrative, the Seattle-based home listing site thinks the Pandemic Housing Boom has some gas left in the tank. Between July 2022 and June 2023, Zillow predicts that U.S. home prices will rise another 7.8%.”

And they are predicting that even areas like Boise, Idaho, which we are already seeing is slowing down and having some difficulties, are going to rise 12% in the next 12 months, more or less.

Remember, their Zestimate algorithm already screwed everything up for them the first time around.

Moody’s, albeit showing a more balanced forecast, isn’t doing that much better either. I mean, let’s get real here. Predictions for 2024 are crazy. We can’t even know what will happen in the next month, let alone the next six months. Plus, they are predicting far into 2024 with data that is lagging.

Fortune says, “Keep in mind that some of this home price growth is already baked in. On the data collection end, home transactions lag. Many of the home sales that will go final in August and September actually occurred back in June and July.”

In an August 1st article, this is what Moody’s said, according to Fortune: “Moody's Analytics forecast model predicts that The Villages in Florida is poised to see the biggest drop in house prices. Between the fourth quarter of 2022 and the fourth quarter of 2024, Moody's Analytics predicts, home prices in The Villages will fall 12.8%. Not too far behind, are Punta Gorda, Fla (-11.4% forecasted home price decline); Spokane, Wash. (-9.4%); Cape Coral, Fla.(-9.4%); Ocala, Fla. (-9.3%); Lake Havasu City, Ariz. (-9%); Fort Lauderdale (-8.6%); Reno (-8.2%); Missoula, Mont. (-7.7%), and Palm Bay, Fla. (-7.6%).”

I don’t necessarily agree with Moody’s prediction either, because I’m looking at Florida, and their current prices are pretty smooth, their inventory is also low, and their interest rates? Everybody thought interest rates would shoot up to the 8-10% range, but we’ve gone down to 4.99%, because people forget that in a recession or in a time of economic hurt, investors buy more 10-year Treasury bonds, affecting the mortgage rates by making them drop.

And the mortgage rates weren’t even that high to begin with.

I understand that some people can’t live with uncertainty, so they need predictions. All I can tell you for sure is that right now, we’re not crashing.

What now?

Here’s the fact: we don’t know what’s going to happen. On one hand, we have Zillow predicting that home prices are going to go up that high in the next 12 months or less. That’s crazy. And on the other hand, Moody's is predicting we’re going to go that low until 2024. That’s also crazy.

Pay attention to the data of the here and now, and know that forecasts that far into the future are not reliable because who knows what external circumstances could happen between now and then?

But I want to have a solution for the agents out there like me, too.

(Screenshot of Tristan post to labcoat agents group)

This is what I wrote a few days ago to the LabCoat Agents Facebook group when I discovered what was happening with Opendoor and Zillow.

At the end of the day, real estate is a people business. It is a relationship business. Yes, agents, we will have competitors like Zillow and Opendoor—big companies that have control over where the market and the consumer go. But the best way to beat these big competitors is to build good relationships and beat them in the niches—our local communities.

As Sean Cannell said, “The riches are in the niches.”

There will be other big companies who will tell us that they want to help when, in reality, they answer to the bottom line. To them, the stock is everything. And, of course, they are going to try to disrupt an industry.

Embrace it. That’s a fact. This is the competition we’re up against here. Get ready. Build relationships. Use social media. Those relationships are one thing that these companies can’t take away from you.

Accept it. Move on. If you can, don’t use these companies. If you can’t, do it with your eyes open and know that they’re trying to get you. Just keep going, keep learning, and leave me a message on my socials if you want to tell me something.