Zillow-Owned Homes Challenge Realtors and Buyers

PORT ST. LUCIE, Fla. – Treasure Coast residents eyeing the real estate market likely have spent many hours searching the online marketplace Zillow. But did you know the Seattle-based company has a stake in the game too? Zillow bought thousands of properties amid the nationwide real estate boom and is still trying to sell them. Many listings are cheaper than comparable homes – but there’s a catch.

Working with Zillow has been difficult, Treasure Coast residents and real estate agents told TCPalm, citing issues with communications, a lengthy contracting process and much-needed renovations not being addressed.

“I’ve showed many Zillow-owned homes and (the company) essentially Band-Aided the property to make it presentable,” said Suzanne Healey, with RE/MAX of Stuart. “A global conglomerate cannot do a local real estate agents’ job. They tried.”

Cheaper Zillow listings entice buyers

Over 60 Zillow-owned homes have been listed for sale on the Treasure Coast since June 1, according to market data. Ten were still available as of Feb. 2. A majority of these properties were listed at or slightly below the company’s “Zestimate,” meaning the home’s predicted market value. That’s a rare sight, as median, single-family home sale prices reached record highs last year.

“I think that (Zillow) was purchasing high, and because they ended up being wrong about the way the market was going to pan out, they’re just dumping properties now,” said Tracey MacLeod, with Premier Realty Group based in Stuart.

Affordability is what initially enticed Jupiter native Natasha Biggie and her husband, Stephen, to tour two Zillow-owned homes in Port St. Lucie. The couple made an offer on both houses, but Zillow declined one offer with no explanation and didn’t respond to the other offer until after it had closed with another buyer, she said.

Of the Zillow-owned homes still for sale on the Treasure Coast, only one had an asking price higher than its Zillow market value: a three-bedroom home on Southwest Coral Tree Circle, listed at $599,000 – $200 more expensive than its $589,800 Zestimate. Still, the St. Lucie County property is less expensive compared to the two other three-bedroom homes Zillow listed for sale in the same Vitalia at Tradition neighborhood, listed at $669,900 and $699,500.

Zillow is selling some homes for significantly under the area’s average sale price. For example, the average single-family sale price in the 34894 ZIP code during the fourth quarter last year was $362,006, according to market data. Half the Zillow-owned properties in the area were up to 32% cheaper – at $260,000, $312,648 and $331,214.

“We would’ve been willing to increase our offer or see what we needed to do to make that deal happen … and we just got no response,” said Biggie, 32, who has two daughters ages 5 and 7. “The complete lack of communication was just amazing.”

Realtor: Zillow is ‘frustrating’

Working with Zillow was a challenge, according to MacLeod and at least five other Treasure Coast Realtors whom TCPalm interviewed for this story. Each property they showed had varying renovation needs, ranging from chipped paint to exposed electrical wires.

But the biggest issue was the lack of communication between Zillow agents, which prolonged repairs and the contracting process, Realtors said.

The only Zillow-owned home MacLeod closed on was a St. Lucie West condominium that was in “working condition,” but had no washer, dryer or refrigerator, she said. It also took multiple days for Zillow to respond to her client’s offer, MacLeod said. Sellers typically respond in 24 hours or less.

“In this market, you don’t have time to be waiting around,” she said.

Stephanie Zaqqout, a Realtor with NextHome Treasure Coast, had a similar experience. She has shown at least six Zillow-owned properties, but has closed on only one: a Jensen Beach single-family home, she said.

Exposed wires and leaks under the sink found during the inspection were promptly addressed, but only because those issues would have affected the buyers’ ability to get homeowners insurance, Zaqqout said. Other renovations have been minimal, she said, adding that one Zillow employee told her the company does not fix any issues unless it’s detrimental to the sale.

Biggie described the two Zillow-owned homes she toured as decent but “needed work,” adding the infrastructure was dated and there was water damage in one property.

“It wasn’t exactly like we were unaware of how much work the Zillow-owned home needed,” Biggie said. “No complaints on that front, but we definitely would’ve had to bump our budget up.”

Zillow didn’t have dedicated agents working directly with buyers throughout the process, Zaqqout said, so communication was unorganized. Her client was set to close on Jan. 14, but Zillow never sent her the paperwork, which delayed the closing by five days, she said. It took about six weeks to close.

“No communication. No nothing,” Zaqqout said. “As an agent, it’s very frustrating … How do you tell your buyer that’s ready to get the keys that you don’t even know if we’re closing? “I’m glad they’re getting out of the home-owning and selling business,” she said. “This market is stressful to begin with, but this just heightened it very much.”

Zillow-owned homes

Zillow purchased homes through its Zillow Offers business, a house-flipping operation offering instant cash. Its website advertised those homes to buyers as “move-in ready.”

However, the company purchased overpriced homes and then faced delays in renovations and cost increases due to labor and supply constraints. Not seeing a return on its investment, Zillow announced in its Nov. 2 shareholder letter that it was stopping its home-buying program. Zillow cited a roughly $304 million loss in the third quarter because the company had to list these properties at a price that would exceed its own market-value estimates, the letter says. The company also laid off 25% of its employees.

Realtors’ problems with Zillow could be the result of the program ending, according to a prepared statement a spokesperson provided TCPalm.

“We have been experiencing some issues related to heavy offer volume due to high buyer demand in the housing market and a labor- and supply-constrained market complicating our operational capacity,” the statement says.

Zillow was selling about 8,000 houses nationwide when it decided to end the program.

TCPalm doesn’t know exactly how many homes Zillow purchased on the Treasure Coast. The Zillow spokesperson said he was unable to provide that data, and the area’s metropolitan service area data was not readily available.

Though Realtors didn’t advise against buyers purchasing Zillow-owned homes, all the ones TCPalm interviewed suggested having an experienced agent to stay on top of the sale.

“The inventory is so low right now that it’s kind of like you have to take your shot,” Zaqqout said. “We don’t love (Zillow), but we have to play in the sandbox with them.”

© 2022 Journal Media Group. Catie Wegman is TCPalm’s community and real estate reporter.