Greetings folks! Some of you may remember my HUD foreclosure blog from the early 2000s, back when my first office was the sole lister of all things HUD in Northern Colorado. Additionally, we handled a large portion of the Fannie Mae foreclosures and a small amount of Freddie Macs too, colloquially known as REOs (which Ben Carson infamously confused with Oreo cookies). For years there have been rumors of a new wave of foreclosures coming, so will we get to see the resurrection of my HUD blog?
Believe me, I’d love to openly mock some of the homes I’m attempting to sell, a marketing tactic which worked alarmingly well. However, REOs as we knew them aren’t back, nor will they return anytime soon. As we continue to see double digit appreciation and fewer homes with spray painted toilets and bathtubs, even a relatively new homeowner with a 100% loan can typically turn a profit after a couple of months of ownership. But we are starting to see listings very similar to the REOs of the early 2000s: the iBuyer listings, with Zillow flips chiefly among them.
Zillow listings share many of the same hallmarks that made HUD homes and, to a lesser degree, FNMA and FHLMC foreclosures, intriguing with their all-too-common issues: Wonky layouts, lousy paint, bad flooring or hastily installed, base level carpet, less desirable locations, and an overall lack of maintenance inside and out. In short, they’re weird in all the wrong ways.
I have a theory, of course.
In 2008, someone behind on their mortgage might have weighed the pros and cons and decided staying in their house until the Sheriff arrived was in their best interest. And, you know what? In many cases they were probably right because most of those people were also completely underwater value-wise. I remember one particular subdivision in Greeley where the HUDs were often listed at half the price from which they had been sold years earlier (Balsam Village, if you care). Those same people today may have the same level of apathy toward dealing with house matters and, perhaps, paying the mortgage. The game changer now is the home equity most owners have and enjoy.
Although Zillow was around in the REO age, their present day ubiquity and Make Me An Offer buttons are easy excuses for folks wanting to do next to nothing and get something. I won’t admonish anyone for choosing to go this route, but I must warn that the path is much different than selling your house traditionally (read: trying to get the most money from your sale).
Yours truly hasn’t had to compete directly against Zillow for a listing, perhaps because my clients tend to be the smartest people around. But I do have several colleagues who have competed against Zillow and I’ve seen the fees they charge, which wind up being about the same amount as mine. And what does one get in an ‘easy’ Zillow offer? A below-market price, of course, with the benefit of only having to leave the house in broom-swept condition. If the seller decides the offer is too low, or if a Zillow rep gets into the house and decides it will be too much work to flip, they then refer the seller to their residential brand, Atlas Real Estate, for a somewhat traditional listing. So to clarify: Zillow listings are the Zillow-owned flips and are pretty much what FNMA foreclosures used to be - bare minimum flips with the occasional roof job or paint. Some of you may have noticed I've mentioned Atlas and Zillow are the same company. A-Z. Kinda familiar, right?
Let us agree it probably isn’t ideal for most sellers to sell to Zillow, but buyers of these listings have need for concern as well. You may be saying, “But if they’re priced correctly, who cares?” Another member of my Indie group has written two contracts on Zillow listings, both of which had problems inherent to a transaction where the seller is a seller in name only. One had a roof installed that wasn’t HOA approved, an issue which was then passed on to the buyer. And in both of those transactions the buyers were targeted for wire scams. I don’t have an explanation for this other than the scammers are perhaps more acutely aware of - and able to mimic - a national brokerage, especially Zillow.
Yet more reasons to go with a local independent broker, right?
Because they aren’t going anywhere, I felt it necessary to bring up the internet offer phenomenon since statistically there will be a few of you that decide you’d like to go that route on a future sale. I would just ask that you give me the opportunity to see what you’re up against when getting a deal from the Zillow juggernaut. And don’t even get me started on Redfin.
Cheers and enjoy the rest of the week!