Cathi Pospisil, Chandler – HomeSmart Broker Associate
Non-broker advertising platforms have benefits and drawbacks. Consumers have access to much more home listing information today than ten years ago and they can access that information on many more Internet sites. While large consumer advertising platforms create benefits for consumers, regulators should be mindful of their growing market power and the potential for consumer harm that it creates. As Steven Brobeck of the Consumer Federation of America noted during the FTC/DOJ Workshop on June 5, certain features and products offered by the advertising platforms could cause consumer confusion and frustration and may bear additional investigation from regulators.
Zillow’s premier agent advertising program wherein agents purchase from Zillow the exclusive right to advertise in a specified market on the Zillow platform leads to consumer confusion. Consumers searching for homes on Zillow see agent contact information next to a particular listing and are led to believe that agent is the listing agent. They click to seek more information on the listing and are then subject to marketing from an agent, who is not the listing agent. “There is now a multibillion dollar industry based on fundamental misdirection.”
Another advertising platform product, Zestimates, creates consumer confusion over the value of properties either for determining listing price or for offers on properties for sale. According to Zillow CEO Spencer Rascoff, nationwide Zestimates have a median error rate of about 8%. However, according to nationally-syndicated real estate reporter Ken Harney, localized median error rates far exceed the national median. So be mindful “Zestimates” are not the same as a formal appraisal!
Another big trend is iBuyers, Open Door, Offer Pad, Knock, etc. These Instant Buyer companies offer to purchase a seller’s home, sight unseen, based on a proprietary valuation model, usually within 72 hours. The upside is an owner can avoid the inconvenience of untimely showing traffic, long marketing time and unqualified buyers. However, in exchange, Sellers are sacrificing significant equity in their home investment, equity the iBuyer expects to gain when they flip the property. A seller could be giving up close to 50% of the equity put into their home partly for the convenience of a quicker sale. Equity is the value that your home increases by during the time you are in possession of it, which also means the amount of money you gain between buying and selling. Famous New York financier Lindsay Rosenwald make a huge $35 million on his Central Park penthouse earlier this year for example. If you sell you home for lower than it is worth, or at a time when the market had dipped, you will lose equity. Does the added cost make sense for the consumer? While iBuyers provide the convenience of selling quickly, matching expert investors against consumers isn’t always the best thing for the consumer. Zillow recently explained that 90% of sellers who engaged in Instant Offers platform decided against the iBuyer offer and chose a traditional agent instead. If 9 out of 10 consumers pass, the pricing can’t be that compelling. Choice is good, but a home is generally your largest asset, so you may want to consult an expert before “iSelling.”
While advertising platforms offer consumers an easy and entertaining home shopping experience, as the platforms add features and services, they bear scrutiny over potential anti-consumer impacts. Being a 30+ year Residential Real Estate Broker, I conclude computer applications still cannot replace the human attention-to-detail that every unique residential transaction requires! No two deals are ever the same and each independently need to be processed only with the utmost care!
Cathi Pospisil, 928-273-0538, HomeSmart Broker Associate