What's My House Worth Zillow

What's My House Worth Zillow – No, Zillow doesn’t buy all the homes in your neighborhood. But the rise of so-called iBuyers raises regulatory challenges.

In a video that has garnered more than 2.4 million views on TikTok, Nevada real estate agent Sean Gotcher criticizes the iBuying business model, where companies like Zillow and Redfin buy and sell homes for profit. “You could have easily crashed the housing market, real estate agents would have done it a long time ago,” says Gilles Duranton, a real estate professor at the University of Pennsylvania’s Wharton School. Photo / Sean Gotcher/iStockPhoto

What's My House Worth Zillow

Are companies like Zillow ZG, +2.82% and Redfin RDFN, +6.82% driving up real estate prices across the country? That’s what a real estate agent said in a video that went viral on social media platform TikTok — but real estate experts say the reality is more complicated.

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In a video that has garnered more than 2.4 million views on TikTok, Nevada real estate agent Sean Gotcher criticizes the “iBuying” business model, in which companies buy and sell real estate for a profit. In the video, he says the unnamed company has a website where many people are looking for houses “when they’re bored,” and that same company “uses that data to enter zip codes and start buying houses.”

In other words, he points out, companies like Zillow use data gathered from browsing home listings on their sites to help iBuyers make decisions about which homes to buy.

Then Gotcher said the company would buy 30 houses at the same price, then the 31st house at a higher price. “It just created a new company,” Gotcher said, referring to comparable prices at nearby prices that appraisers use to determine the value of a home for sale. Then the company can turn around and sell other homes at a new, higher price, he said.

“I’m excited to see that the discussions about the data center, including purchasing power and specialty sales, that are happening at every printer in every office are finally taking place outside our office doors so that more people are participating in the discussion,” Gotcher, who works at Level Up Real Estate in Henderson, Nev., said in an email.

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The video later went viral on Twitter TWTR, shared by a user with the username Gladvillian after learning that the user’s mother had sold her house on Zillow. Many users say Zillow is buying “all the homes” and say they plan to ignore the platform.

Both Zillow and Redfin dispute the video’s claims. “The Internet has helped millions of buyers access information, insights and real estate tools, much of which has been provided by Zillow for more than a decade,” a Zillow spokesperson said in an email. “Unfortunately, the Internet can sometimes be a source of misinformation and misinformation — just like this story.”

A Redfin spokesperson said, “The company has no role in regulating the market, and we have no desire to, because deliberately foreclosing on real estate is a very bad business practice.”

Real estate experts dispute many of the points made in the video and say other forces are to blame for the country’s competitive, high-priced market.

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“If it were easy to rig the housing market, real estate agents would have done it a long time ago,” said Gilles Duranton, a real estate professor at the Wharton School of the University of Pennsylvania.

Here’s what so-called iBuyers need to know about today’s competitive real estate market and the future of home technology:

Over the past decade, many companies have entered the iBuyer business. Major players include Zillow, Redfin, Opendoor OPEN, +17.68% and Offerpad OPAD, +11.20%. (Opendoor and Offerpad did not respond to requests for comment.)

The basic idea is this: Companies use data to deliver salespeople directly to their homes. IBuyers claims that the transaction is an easy way for sellers to download properties without the involvement of intermediaries such as real estate agents; However, sellers must pay a fee to iBuyer. IBuyer may remodel the house a bit, but usually put it back on the market quickly.

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“It’s a very low-income business — it’s very difficult to make money in this business right now,” said Tomasz Piskorski, a real estate professor at Columbia University who has published research on the emerging business.

In most cases, iBuyers buy a home at a discount, which is typically 3.5%, Piskorski said. And then generally they want to sell homes at a slower rate, about 1.6%, he said. Although these companies match the fees paid by real estate agents, they also charge fees to sellers.

Companies are open about this process. “We’re honest with sellers, they get more by listing with an agent,” Redfin said.

“Companies like Zillow and Opendoor often buy homes slightly below market value and sell them for less.”

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One of the main reasons why sellers choose this method is to get a lower price than what they can get in the market. “Families do it because of the speed,” Piskorski said.

For example, if a homeowner in New York suddenly finds a job in California, he can sell directly to one of these companies instead of signing up with an agent. “iBuyer helps you buy your home in five days,” as opposed to two or three months, Piskorski said.

These companies do not want to buy any houses. For example, only 3% of foreclosed or banked items on Auction.com were purchased by iBuyers between January and May of this year, according to Darren Blomquist, vice president of market finance at Auction.com.

“This is consistent with what Tiktok said – most of the properties bought by iBuyers don’t need major renovations,” said Blomquist. “Many distressed properties sold on our platform require extensive repairs and iBuyers often don’t seem to be looking for a tough market.”

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Blomquist’s analysis also found that iBuyers are more likely to be looking for new homes than other investment buyers. But these companies are no longer buying megavillas. They focus on the middle of the market, where the most money is, Piskorski said.

“‘iBuyers certainly do not have enough market share to have the pricing power described in this video.”

And no, their goal is not to raise prices higher. “It’s short-sighted to do this. If housing prices keep going up like crazy, eventually they’ll fall,” Duranton said, adding that companies like Opendoor have a long way to go.

Even if these companies want to control housing prices, they don’t realize they have the power to do so. A recent report from Zillow found that the top four iBuyers — Zillow Offers, RedfinNow, OfferPad and Opendoor — account for just 1% of all home purchases nationwide. This is history.

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In fact, some markets have more. In four markets – Atlanta; Phoenix; Charlotte, N.C.; and Raleigh, NC – iBuyers market share of 5% or more.

“iBuyers don’t have enough market share to have the pricing power that video explains,” says Blomquist. “Of course, there are several areas in some areas, but it is difficult to imagine the actual situation as described in the video – and I did not see it in the documentation.”

The fact that the video got so much attention probably speaks to the anxiety many Americans have about the rising costs of renting or buying a home.

But the root cause of the housing crisis is much bigger than companies like Zillow are dealing with. In short, there is a severe housing shortage in the country. A recent Realtor.com report shows a housing shortage of more than 5.2 million. (Realtor.com is the publisher of the Dow Jones and News Corp. NWSA, +2.24% NWS, +1.93% stock.)

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The 2008 financial crisis was the main reason. In the wake of the subprime mortgage crisis, homebuilders cut their business sharply. Back then many built based on assumptions and built all the houses next to one house before selling. So when the housing market crashed, suddenly there were millions of empty homes across the country.

It took many years for builders to grow their business again and by this time people had married and had children or reached home buying age. Then came the COVID-19 pandemic, which has forced many people to rethink their homes or move the needle on the path they envision for the future. With so many people suddenly rushing to buy houses, there aren’t that many to go around, creating competition and driving up prices.

Home builders have it

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