Saturday, August 10

I-Selling in Jax: OpenDoor and Zillow

floors and paint sell homes, not dirtZillow is going to join open door in Jacksonville as companies that will buy your house fast. I assume we've also had the We Buy Ugly Homes folks in Jax for a while, too. Flippers, and those types. But Zillow and Opendoor are supposed to be more mainstream, and I assume the business model is just to buy low and sell high.

I assume that the concept is to get you and all your junk out of the house, fix a few of the problems you've been ignoring (like green carpet or cracks in stucco), and list the house in a few months. For the ability to sell a clean slate, these companies will pay you with no hassle. At least for Zillow, it looks like you send an inquiry, send in some photos, get a visit from a realtor, and then get an offer. A week later, you're off to Akron. 

The commissions aren't even all that much higher than using a traditional realtor, so you're not losing too much money there. If time is a big factor (need to leave and don't have time to do updates), then this may be a popular choice in Jacksonville. Realtors, title companies, and mortgage companies won't be negatively effected, either, since each home that goes through the process will sell and close twice in the normal time of selling the house once. Even buyers will benefit from professionals coming in and making the houses slightly better before selling them. 

The only people who might lose out in this situation would be the sellers. You've got a company that knows home values coming in and making an offer that needs to feed the business, and it's about more than that initial 10% commission. Let's say you have a $300,000 house, which is pretty much the kind of house both Opendoor and Zillow want. Your "Zestimate" is even right at $300,000. But that's not exactly how it works. Your home is only worth $300,000 if it's in the right condition, and I assume the goal of the realtor and any inspections would be to know how far away from the estimate your home will be. That's a perfectly legitimate way to conduct business, but it might feel kind of frustrating to the seller. 

The realtor comes over, makes some notes, sends along a report, etc. Your offer comes in at $290,000. And $29,000 commission on the sale, so you're at $261,000. Still a decent amount of money. I did read some reviews online that said the offers after inspection tend to go down a lot, so my $10,000 is probably conservative. These are professional investors, after all. 

If you hire a realtor, however, you'll get the advice on what needs to get done to sell for $300,000 and pay 7%. Let's say it's $5,000 in work to get the house to that average sales price. That's a lot of work, but worth it. $21,000 commission and $5,000 investment leaves you with $274,000. That's $13,000 more than selling fast. And if you put $5,000 in the right places, it will still sell fast.

You also have to consider what these companies know about sales and trends. They might not offer on some houses Jacksonville, but if they want your house, it's because they know the house will sell, possibly beyond the comparable homes in the area. Again, that's their gamble, not yours. But it's easy to pull carpet and upgrade a few finishes in three months with an empty house, so in that time, your $300,000 house might transform into a $330,000 home. It would probably be a hard pill to swallow for you, but these companies are paying taxes, workers, materials, and all that in order to get the mini flip done. 

My advice? Having lived in a home that we had to sell in one year and making $20,000 on it, I can tell you that the three main factors inside will be lighting, floors, and paint. Outside is similar, with paint being the number one thing you need to do, once you fill or caulk all holes and cracks. And clean up a little. That's probably most of what you'd have to do to get that $300,000 you want. 

When I did the bathroom floors after we moved in here, I added $2,000 to $5,000 to the value of the house immediately. For $50. If you keep adding value to each room as you live in the house, after a year of working on flooring, lighting, and paining, you'll be able to sell that house for beyond the Zestimate because a realtor will walk in and beg you to list the place. But if you can't do the work, Zillow will take it for what it's worth and finish the job. 

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