Understanding Zillow Instant Offers on Your Home
Posted May 17, 2020 in Real Estate Trends
With advances in technology and new ways to utilize data, some companies have sprouted up to create different ways to sell your property. Typically, they use automated valuation models (AVMs) to make quick offers on homes, allowing them to close in a much faster-than-average time frame and then resell the house. From a seller’s standpoint, it can eliminate some hassle and uncertainty. With high “transaction fees” ranging from 7% to 14%, and the likelihood that they will sell the home for more than they paid you for it, you are simply exchanging that smooth and quick transaction for a sizable portion of your equity.
It may be tempting to consider such an offer, but keep in mind there is a reason they are making these purchases. They are determining a price that allows them the room to cover the costs of the transaction, as well as the repairs, and leave room to make a healthy profit. The money they make comes from both the fee charged in the sale at a below-market price, and the profit they make when they sell the home to another buyer. An analysis of one company’s transactions showed they were selling homes at an average of 5.5% appreciation, on top of the price they paid for the home. The average sales price of a home in March in SW WA per the RMLS was $426,300. Just in the sale of a home for $426,300, the company would make $23,446. This does not take into consideration the transaction fee they charged to the seller in the purchase as well. That is a lot of money to leave on the table for convenience.
As always, it’s important to read the fine print and understand what you’re agreeing to when selling your home. Our team at Wollam & Associates is here to answer your questions, no matter if we are advising you in buying and selling your home!
Wollam & Associates
Real Estate Expert
ReMax Equity Group