So, I have heard a complaint about Zillow. The complaint was this: “I used Zillow offers to get a price for our house as we had to move in a quick manner. If I would have known about how much they were going to take for everything. We had to come to the table with money.”
Let’s take a look at why you have to be extremely careful of Zillow offers or any of the other buyer services:
First, most people think it is a great idea to think that Zillow is doing appropriate Comps on a property. What is a Comp? That takes your home, and compares it to no less than three homes that are similar in nature to your own. Only a real estate professional can give you an honest valuation of your home. Zillow does not seem to have any method to the madness when it comes to what they price your home at. I did my house and Zillow priced at $195,400 in a $165,000 Neighborhood.
Second, Fees. Oh, the fees! If you take the Agent Selling Costs & Fees sit at 4.4% and the additional costs are at $400-$500, you have hit the regular price point for a regular Real Estate Broker. Then, they also charge you 2.9% for closing costs, which is a “Service Charge.” Now, that puts you at 7.3% just at that you never get back. Then you have Prep and Repair Costs of $11,400 that gets taken out.
Let’s do the math: $195,400 MINUS 4.4% ($8,597.65) = $186,803.35. Now take an additional $400 out of that as a service charge – or – $186,403.35. Now it’s time to take out Zillow’s Service Charge of 2.9% or $5,666.67 which leaves you now with $180,736.68. When you couple that with Zillow’s charges for preparation and repairs you are left with $169,336.68. You can do the numbers using the above on your home and get the value you would be left with.
Third, if you had any equity in the home, say I bought it at $180,000 and now have a take home in pocket of $169,336.68, I would be upside down in my house! That is not good at all Further what would also be gone is any money and equity that I would have in the house – I would literally be broke!
So, let’s compare it to a traditional sale.
Your real estate broker looks for 5%-6% commission and does all of the marketing. You get to pick how much closing costs you want to put into the mix – $400-$600? How much in concessions? What level of repairs do you want to do? You have to do all of the required, but anything that is just a notice is optional for you. So, your bill can go all the way down to a few hundred dollars in repairs. So, say for instance you have to repair an electrical receptacle for $40 and an outside pipe for $32. $72 total.
On that traditional real estate sale your $195,400 could net you $182,000. But you take equity in your home to pay for all of those things – and not become upside down. The important take away from using any of the internet buyer services is this: Know that what you pay for and what a real estate broker tells you is a good value for your property above what you paid is your equity, and that is truly what places you in a better position across the board.
It’s your choice, we prefer you keep more of your money.