Real Estate listings business Zillow Group will start buying homes and flipping them, a risky proposition that is untested for the internet based company that could hurt its traditional brokerage company.
On Thursday, Zillow announced that it would begin buying homes in Phoenix and Las Vegas, renovate them and flip them in less than three months. The company is initially planning to hold between 300 and 1,000 homes 2018 year end, which equals an investment of between $75 million and $250 million.
Executives at Zillow announced that they do not want to eliminate the real estate agents, who are revenue generators for its listing business through buying ads and leads for customers. Instead, the company said it has handpicked real estate agents that will work these transactions in “Zillow Instant Offers.”
However, agents are far less essential in quick flips home transactions, which are driven by technology and not interactions face to face. This is the most recent in a series of new businesses and technologies that threaten to disrupt a residential brokerage industry worth billions of dollars and the livelihood for tens of thousands of U.S. realtors.
Zillow has followed its competitors such as Redfin Corp and Open Door Labs, into sales. Executives at Zillow say that consumers are more accustomed to smaller transactions that have become almost seamless due to technology.
The same consumers have become more impatient with today’s process of selling a house, which may include the investing of time and money in repairs, dealing with repeated showings as well as worrying about if the home would sell prior to closing on another one.
The CEO at Zillow Group Spencer Rascoff said consumers want an experience that is on-demand. The days of emails to real estate agents and waiting for answers back is not the same any longer.
There has been a slow process of change in the residential real estate industry with technology, which is due in part to consumers historically finding a level of comfort in the slow process of selling their home to help make sure they will get the best price.
Of recent, investors have started to pour money into companies that want to make it easier and faster to sell homes, often through replacing some or most of the jobs that a real estate agent conducts, with new technology.