Real estate platform Zillow changed up its business model this week, announcing that it plans to purchase and sell homes in Las Vegas and Phoenix.
Zillow will be working with Berkshire Hathaway and Coldwell Banker to make offers on homes before it finds a buyer. Zillow will pay commissions and also “make necessary repairs and updates and list the home as quickly as possible.”
Calling it “Instant Offers,” Zillow says,
“the program gives real estate agents the opportunity to acquire new listings by connecting them with motivated sellers who have taken a direct action to sell their home. Across all testing, Zillow found the vast majority of sellers who requested an Instant Offer ended up selling their home with an agent, making Instant Offers an excellent source of seller leads for Premier Agents and brokerage partners.”
Shares fell 7% on Friday, following the revelation.
This is a marked business change for the website, which is mainly a hub of information about real estate properties. Buying up homes will provide added costs and risks, so some investors didn’t like it.
Yet Zillow says it has been testing out this program for about a year and that it is optimistic about its future success.
In an interview with CNBC, CEO Spencer Rascoff said, “we’re ready to be an investor in our own marketplace.” He believes Zillow has “huge advantages because we have access to this huge audience of sellers and huge audience of buyers.”
Rascoff acknowledged that Zillow will be taking on debt to execute on its new mission.
This will also put it in competition with Opendoor.