Wall Street Journal writers Laura Kusisto and Rolfe Winkler reported last week that, “Real-estate listings company Zillow Group is getting into the business of buying and flipping homes, a risky and untested business model for the online service that could disrupt the traditional brokerage business.
“Zillow said Thursday it will purchase homes from consumers in Las Vegas and Phoenix, renovate them and aim to flip them within 90 days. The company initially plans to hold 300 to 1,000 homes by the end of the year, which amounts to an investment in the $75 million to $250 million range.
“Zillow executives said they aren’t looking to get rid of real-estate agents, who generate revenue for its listings business by purchasing ads and customer leads. Instead, they say they have handpicked agents to work on the transactions in its ‘Zillow Instant Offers’ business.”
The Journal article stated, “Nonetheless, agents are much less essential to these quick-flip transactions, which are powered by technology rather than face-to-face interactions. This is the latest in a string of new technologies and businesses that are threatening to disrupt the multibillion-dollar residential brokerage business and the livelihood of tens of thousands of Realtors.
“Zillow is following other competitors, including Open Door Labs Inc. and Redfin Corp., into the sales business. Zillow executives say consumers are used to smaller transactions that are virtually seamless thanks to technology.
“Those same consumers are increasingly impatient with the process of selling a home, which can include investing money and time in repairs, putting up with repeated showings and worrying whether their current home will sell before they close on a new one.”
More broadly, last week’s Journal article added, “Home prices hit a record in late 2016 and have continued to climb at roughly twice the rate of incomes and three times the rate of inflation ever since, raising questions about how long such gains are sustainable. Moreover, rising mortgage rates and a tax code that is less favorable to homeownership are also headwinds to demand in the coming months and years.”
