“Cash for homes” is becoming much more widespread lately.

If you are a realtor or a broker, I’m sure that you used to laugh off those “we buy ugly houses” billboards on the side of the freeway.  Are you laughing now?  Earlier this year, Zillow joined OpenDoor and Offerpad in using the “cash for homes” method of marketing.

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Real estate marketing is already one of the toughest nuts to crack; there are so many technologies and so many options for using those technologies that it can be dizzying to contemplate.  But the vast majority of realtors and brokers don’t have the financial capital to participate in any sort of ‘cash for homes’ type of program, which could, conceivably, make it more difficult to get listings.

Offerpad had initially stated that they would be participating in Zillow’s new cash for homes program, but has since parted ways with the big Z; they decided a couple of months ago that it wasn’t a program that they really wanted to participate in, after the original announcement.

How is this potentially going to hurt agents?

Zillow has a slightly different spin on how they are going to divest themselves of these ‘cash for homes’ acquisitions – they will enable agents and brokers who pay to be part of their Premium services the opportunity to market to home owners who are considering participating in the program.  So if you aren’t paying Zillow for Premium services and listings, you will effectively be shut out of working with them.

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The idea of “cash for homes” is not a new idea, plenty of people have been doing it successfully for years.  And for sellers who need to get out of their current property quickly and without worrying about getting top dollar, these programs can be a lifeline to them.

Most of the “cash for homes” buying programs don’t offer sellers top dollar for the properties, regardless of their advertised claims.  By deducting the cost of bringing the property up to comp value as part of the cash offer, these companies can leverage the spread between what it would cost a homeowner to have the work done, and what they can pay to do the same work via contractors who do a lot of work for these companies and therefore get paid at a reduced rate for the same work.

All press is good press?

The initial markets that Zillow targeted – Orlando and Las Vegas, followed by Phoenix – have given Zillow (and Offerpad and OpenDoor upon arrival) plenty of press in the local news as well as some national coverage in Forbes, etc.

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But the backlash against the spreading of the “cash for homes” buying style has already begun, so there is a little tiny glimmer of light.

Interested sellers receive a cash offer from Zillow, usually within 48 hours. That price is then confirmed a few days later when Zillow has a home assessor and home inspector physically inspect the property. In addition to the Zillow offer, the seller receives a Comparative Market Analysis (CMA) from a licensed agent at a traditional real estate brokerage firm on their home’s current market value.

“This offers total transparency to sellers who can review Zillow’s cash offer and compare directly to the valuation the agent provides. The seller can move forward with Zillow, the agent or do nothing right now. The decision rests with the seller,” Wacksman explains.

Given that the average home inspector is going to find any number of issues with any property – especially those with owners who need to get out quickly – it stands to reason that the price will be lowered after the inspection.  By this point, the seller has pinned his or her hopes on the original offer and is wasting time in order to be disappointed with the final offer.

And here’s the hook!

If you’ve got a seller who is considering using one of the “cash for homes” type companies, the single most effective piece of counter marketing you have at your fingertips –

When pressed Wacksman did confide the discount the seller may take could be anywhere between 10-15% or even higher. It depends on the home, market conditions and other factors. For some people it’s worth taking less, not worrying if the sale will close and being able to move quickly.

10-15% less on what is probably a lowball offer to start with?  Hit your potential listers who may be thinking about going with one of these transactions, especially if it’s early in the game and they aren’t on the verge of losing their house to the bank or failing to qualify on contingency for their next mortgage with a looming deadline like the start of the school year.