Author: kps0925

In hot markets across the United States the status quo presumption is that the highest offer will win in a bidding war.  However many agents and their buyers find themselves frustrated, heartbroken, exhausted, and sometimes stuck between buying a home they don’t fully “feel home,” losing out on a new job, living far from family, even worse facing the dread of having to renew a lease on an apartment they’ve been dreaming of saying “good bye.” 

Many buyers start out on a home searching journey with hope, optimism, dreams, and a sense of control over what , when, and where they want to call home.  They’ve searched Realtor.com, Zillow, Trulia, Redfin, and every real estate website out there to make sure that they haven’t missed out on their dream home.  Their mobile phone is charged and always on so that they can be the first to book the next new listing to hit the market.  Unfortunately, after losing out on several homes that they want the reality begins to hit hard that there’s a possibility that their dream home will simply be a regular home.  It is this fear of losing out on a property or simply losing out to someone else that prompts buyers to become guerilla buyers. 

What are guerilla buyers? 

Well — A typical guerilla buyer often begins his journey like this.  Agent A lists a property on the market.  Guerilla buyer receives alert that a new listing has just hit the market.  Without even calling a real estate agent, the guerilla buyer is in his car enroute to see the listing.  He then emails or texts his agent to book a showing.  Within a couple hours of receiving confirmation of the booking, he receives another alert that the newly-found listing had received multiple offers.  Guerilla buyer rushes to tour the property only to find a second email or text alert that the Seller had instructed the listing agent for a “Highest & Best” offer with a deadline..  

Within minutes of receiving the message Guerilla buyer instructs his agent to perform due diligence on the lowest price the seller might accept.   The buyer’s agent is often left with few options that might include reaching out to the listing agent with several probing questions like:

“How has traffic been for property ABC?”

“Do you have any offers on hand?”

“Would the seller consider a contigent offer?  Just trying not to waste everyone’s time, if not.”

What can my clients do to make their offers stand out?

Would you consider an offer of $279,000? 

“I just have a quick question about property ABC, can you givec me a call me back” 

“When will you present the offer to the seller?”

“Is there a closing date that would stand out for your seller?

“Is there anything you can legally share with me that would important for your seller?”

Such questions to a listing agent are often responded with “My seller is looking for the highest and best offer.” 

If the seller had received a great number of offers on the table, he will have to first compare them and then attempt to negotiate individually with each potential buyer (or at least the top offers). This requires a lot of back and forth and emotional toll on all sides, as they counter offer, wait, and possibly receive a counter offer from the buyer. And they’ll have to do that multiple times.  However– the seller and their agent might choose an easier option. They might send out a call for the “highest and best offer.” This usually comes with a deadline so to create urgency for committment.  .

When you hear this from a seller, they’re essentially letting buyers know they have received multiple good offers. And instead of wanting to negotiate with each buyer, the seller wants to streamline the process. They only want the best offer, no negotiating and no counter offer.

Once the deadline passes, they’ll evaluate all the offers they’ve received and choose one. 

What are sellers looking for in a “highest and best” offer?”

“Highest and best” means that the seller has multiple offers and feels s/he doesn’t have the time or desire  to haggle back and forth or go through hundreds of pages of offers to find the golden offer.  Instead he wants to get a final best offer from each buyer,  But a highest and best offer doesn’t often mean the highest offer  When you’re putting together a highest and best offer, it’s important to remember sellers aren’t just going to look at the amount of money you’re offering.  While important — money is only one motimvational factor.  Sellers will look at your entire offer as a whole package.  Sellers will look at everything ncluding what we call SCARY fees.  They’ll weigh everything from Selling commission, closing cost and date, assistance to buyers, repair cost, and yo-yo cost.   These cost can add up to 15-30% discount on the price of a property.  

Consider these examples:

• $353,000 with $10,000 earnest money, bank financing, 5 day inspection, contingent on buyer selling his home, 60 days to close.
• $340,000 with $35,000 earnest money, with bank financing, no inspection, no contingency, closing anytime, appraisal guarantee up to $10,000. 
• $315,000 with $7500 earnest money, with bank fnancnig, no inspection, no contingency, close in 30 days.
• $290,000. all cash with no inspection, no contingency, close in 10 days.

Which one the seller picks will depend on their goals and their urgency to reach those goals. Understanding the “triggers” that motivate sellers can help you put together an offer that will appeal to them and get you the dream home you want.  

How to not lose in “Highest and Best Offer” Situations

If you are a guerilla buyer committed to placing the winning offer, you’ll have to go all-out to ensure your offer is the most atractive and not lose.  Here are some strategies to help you minimize your chances of losing out on the next round of competitive bidding. 

Offer More Money  — Money talks and the higher your offer is from the rest of the pack the higher the probability that you will win.  However — be mindful that if the offer is too high the property might not appraise which could lead to a bank denial.  If you will be offering a significantly higher offer include an appraisal guarantee.  An appraisal guarantee essentially means the seller is assured that in the event the property fails to appraise the buyer will pay$XXXXX over the appraised amount out of pocket.  Caveat Emptor —  you don’t want to get caught up in bidding that your offer will be more than you can afford. 

Increase the earnest — the earnest is like a guarantee that the buyer makes to the seller ascertaining the buyer is fully committed to closing.  In the event the buyer changes his mind the seller gets to keep a partial or entire earnest money.  Given similar offers and terms, the earnest is often the deal breaker for buyers; in particular, first-time homebuyers who may not be fully prepared and properly educated by their agents before entering into a competitive bidding.   .        . 

Pay in Cash — it’s not unsual to hear of buyers with liquid cash or have rich relatives who can help buy with cash.  After the property closes the buyer can refinance the house into his name.  A cash offer is compelling to sellers because they don’t have to wait for a loan to be approved and all of the paperwork that comes with a loan. It is worth noting that all offers are technically cash offers on the closing day whether they are bank financed or wired out of a buyer’s personal bank account.  A geniune cash offer typically means a purchase offer with a quick closing, ii.e, 24 hours, 7 days or less than 10 days.  It would not make sense for a seller to wait 60-75 days for a cash offer when a customary bank financed offer can close in 30 days.  Flexible sellers may not see the same advantage of a cash offer as someone in need of immediate cash.        

Get Pre-Approved — in a slowing market where there are few offers the listing agent or seller may offer a courtesy call to remind buyers to include a bank preapproval letter.  In a hot market the seller or his agent may not have the time or desire to request one.  ALWAYS INCLUDE A PREAPPROVAL LETTER.  

When possible, add an Escalation Clause  — if you want to be sure your offer is for the highest dollar amount on the table without overpaying, the escalation clause might do the job.  An escalation clause offers to net the seller $xxx over the highest bid or another amount.  — up to a specified maximum price.  This is often followed by a requirement that proof of a higher offer is provided.    For example,if there is a bid higher than yours, you’ll increase your bid in increments of $1,000 above the highest bid, up to $450,000.  

Relax on the Contingencies:

Contingencies and concessions are clauses in a contract that will allow you to back out of a sale if the contingency or demand isn’t met.  Some contigencies can be written to include or forfeit the earnest money.  Common contingencies include:

• Home Inspection:  The house must pass inspection.  Be careful here — Every preconstructed homes has imperfections and sellers might not want to entertain an offer that could take their property off the market.  Sellers know — AND THEIR AGENTS WILL REMNID THEM — that when a property is put back on the market after an inspection it loses a significant number of buyers.  Sellers are also aware — AND THEIR AGENTS WILL REMIND THEM — that home inspections are regularly used as a negotiation opportunity to discount price.     
• Financing Contingency:  a bank loan is customarily accepted but don’t get too creative that the offer becomes SCARY to the sellers.  Sellers are not going to take the chance that your Rich Uncle will write a check for earnest money or that you are waiting for an insurance settlement to pay off the house. 
• Appraisal Contingency:  the house must appraise for at least the offer amount.  What if it doesn’t?  The appraisal contingency could find a difficult day to win over an appraisal guarantee.  
• Home Sale Contingency: you house must sell before you close on this one.  This carries a relatively high risk in a hot moving market for sellers because what if something comes along to cancel the sale of your house?  

Seller Concessions/Contributions

• Seller financing — asking a seller to carry a note or wait for his money is call owner financnig.  In slow markets this may be the only way for sellers to sell a property.  In hot markets sellers are less likely to entertain such offers.   .  
• Seller Contribution:  closing cost assistance is important for first-time buyers and buyers without sufficient down payment requirement.  Asking a seller to help pay for 2-6% closing cost is the same as asking him to discount his house for 2-6%.  Since the builk of closing cost is charged to the buyers, sellers will expect a higher price.    
• Home Warranty:  before you demand a home warranty from a seller be sure the other offers are not waiving inspections.  A scenario that can compell a seller to include a home warranty is a property that has languished on the market without a buyer with an unmotivated seller or one that is financially trapped from selling at less than full price.  In this situation a home waranty in exchange for a full price could prove to be successful.       

Closing Date

Even if you offerred the highest price you could still lose out on the closing date.  Some sellers prefer a quick close, and others prefer a longer closing as they, too, must purchase a replacement home.  Perhaps they want to wait to finish a school year or meet a new job start date.

Buyer Agent Commission:

Who is paying the buyer agent commission?  While it is customary for the seller or listing agent to pay the buyer’s agent commission, increasing number of buyers are choosing to pay for their own agent. This nets a higher amount to the seller and motivates sellers to consider their bottom line. .  

Avoid Sunset Clauses

A Sunset clause typically allows the buyer to exit a contract with a deadline.  Few sellers prefer these clauses unless the price and terms are clearly and significantly superior in almost every way.  A high cash offer comes to mind.  .   

A Personal Letter

In tightly competitive markets a personal letter could be your secret weapon to win the hearts and minds of sellers.  Remember sellers are humans too and they understand and prefer someone who will carry-on the torch of a place they call home.  Put your letter writing skills to the test and connect emotionally with the sellers.  Point out things you might have in common to deepen your connection.  However, be very cautious about what you include in the letter so as not to violate the Federal Fair Housing Act.  Consult with your agent or attorney before writing a personal letter and be mnidful about mentioning whether you belong to a protected class (i.e. race, color, religion, national origin, sex, familial status, disability, affordability, etc..”). 

Keep in mind that a seller may counter at any point in the negotiation process.  While it is entirely possible to request the listing agent or seller for additional consideration after submitting a highest and best offer, chances are highly experienced agents will advise their clients that highest and best should mean just that.  Highest & Best.

Until next time!

Homeselling AI, Copyright 2022-2023

NoDiscount.com was created out of a desire to find a scientific solution to one simple question:  Why take chances selling at a discount with only one or two offers?  Why limit a property to offers from only Realtors or For Sale By Owners?  Throughout this site you will be referenced to the term One Special Word.  It is the acronym PROCESS which is recorded at the U.S. Copyright Office.  Each letter in the PROCESS describes a sequence of moving parts that  enables the technology to aggregate offers from every direction:  

PRICING

RESPONSE

OFFERS

CONVERSON

ESCALATION

SAFETY

SYSTEMATIZE

You see– Most sellers will sell a home fewer than two times in a lifetime.  When you consider a majority will sell using outdated books, real estate agents, and techniques that are complicated, costly, and SLOW they will have missed out on valuable offers and in some cases all offers resulting in selling at significant discounts.

By executing and repeating the One Special Word throughout the home selling process you are guaranteed more offers, higher offers, and faster offers.   Every aspect of the NoDiscount.com site has been designed to execute the PROCESS 24/7/365.  It’s like having the #1 agent working for you all the time. 

One of the most common misunderstandings in real estate, mortgage, and the settlement business is the topic of incentives, gifts, discounts, and freebies.  Can you use incentives, gifts, discounts, or freebies to induce or improve the chance of a sale?  

In recent years the Federal Government has been cracking down on one-stop shop incentives and kickbacks for real estate, mortgage, and settlement services providers.  A typical violation involves a scenario where company A offers company B a gift, cash, discount, or other non-bonofide deal to refer business to company B but charges a higher price to Company C, D, E, F, etc..  Clearly this is a restraint on competition and takes away the integrity of a fair market competition.  

Non-bona-fide means the discounts, freebies, incentives, or other financial benefits come with strings attached.  A typical example includes a company A pays company B to receive a client lead whereby company B passes down a higher fee to said client.  The Real Estate Settlement and Protection Act ( RESPA ) was passed in the 1970s to protect consumers from unscrupulous real estate, mortgage, and settlement service providers from colluding or creating schemes that overcharge consumers.  Thus appears to be a lot of fragmented responses on the web regarding this issue both correct and incorrect.  The obfuscation created by many half-experts can position what is a fantastic, permissible, and engenuis promotion into one ripe with uncertainty and suspicion. 

So let’s hear it straight from the regulator’s mouth: 

Real estate settlement act from consumer financial protection board.

In summation:  Unless an individual is paying or receiving discounts or financial benefits for a referral there doesn’t appear to be a violation of Federal law.  State laws; however, can place special limitations on gifts, discounts, freebies, cash and other inducements to parties in a transaction.  A few states allow only licensed individuals to receive or give cash, benefits, or freebies.  

A well informed real estate agent can help to set the expectation and turn what appears to be non-permissable into a great marketing idea.  

Reference: 

Realtor Respa incentives, discounts, freebies

Not all loans violate respa

Hud Violates Respa

Respa For Dummies

General Instructions For Offer Submission

At Homeselling AI it takes only a minute to submit an offer summary. After submission you will receive immediate confirmation via email.  To submit an offer summary simply fill out the form as follows:

Property Address: If you arrived via an MLS link or from one of the large real estate portals the property address may have been pre-filled for you. Otherwise type the house #, street name, city, state, and zip code.

Listing #:  If you arrived via an MLS link or from one of the large real estate portals the Listing# may have been pre-filled. Otherwise type in the listing #.   

Listing Price: If the listing price isn’t already pre-filled simply type in the listing price of the property.         

Offer Price:  Type the offer price using only numbers without commas, decimals, or $ signs.   For example, to enter $500,000 type 500000

Earnest Money:  Type the earnest money amount.   Enter only numbers without characters, ie, no commas, $$, /, -, etc..   For example, to enter $5000 type 5000

Closing Date:   Use the calendar to select the month, day, and year of the closing date. If there is a condition or explanation regarding the closing date select SEE COMMENT. 

Buyer Taking Possession:  If the buyer will be taking possession of the property immediately after closing select YES. If NO, explain.

Discount Amount: The discount amount should have been pre-filled for you. The offer form will automatically calculate and display the difference between the offer price and the listing price.

Seller paying additional buyer agent commission: Select NO if the seller will not be paying any money towards the buyer agent commission. Select YES and enter the additional commission amount that the seller will be paying. Be sure to enter only numbers without $ signs, comma, or decimal. If paying the buyer’s agent commission is the responsibility of the listing agent select NO since the seller will not be paying. For example listing agents customarily offer a commission to the buyer’s agent for bringing buyers. If this is the case select NO.

Closing Cost: Will seller be paying any part of the buyer’s closing cost? Select NO or Select YES and enter the amount needed.

Down payment Assistance: Will seller be helping buyer to meet down payment requirement? Select NO or YES and enter the amount needed.

Additional Assistance: Select NO or Select YES and explain how much is needed. An example of additional assistance could be a rental truck for moving, new paint job, paint holes, windows, carpets, doors, or even a second mortgage. Be sure to explain in detail.

Repairs If the seller will be paying for any repairs whether before or after the inspection select YES and explain in detail and amount needed.

Replacing item or material as a sale contingency: Select NO or Select YES and explain the amount needed.

Anything Else? If there will be other expenses not already included above enter YES and explain the amount needed.

Buyer Requiring Inspection? If buyer will be waiving the inspection select NO. Select YES if buyer will be requiring inspection and enter the total number of days needed to complete the inspection. Enter numbers only. For example if buyers will require 4 days to complete inspection type the number 4.

Paying All CASH: If buyer will be paying all cash to purchase the property, select YES. If NO you may UPLOAD a bank/lender pre-approval letter. Uploading a bank or buyer letter with your offer summary will strengthen your chance of winning.

Loan Amount: Enter the total amount of the purchase that will be in loan. For example if the buyer will be paying 20% down on a $100,000 property the loan amount will be $20,000. Enter 20000. Do not enter $, comma, percentage sign ( % ), or decimals. ENTER ONLY NUMBERS and DO NOT SPELL OUT THE LOAN AMOUNT.

Down payment:  Type down payment amount that will be required by the bank.  If there is no down payment required leave blank or type the number 0 ( zero ). Remember do not type characters, commas, decimals, $$, %, /, -, etc..   For example, to enter $500,000 type 500000 

Other financing:   If you will be requesting or offering other types of financing select one of the options. Select NONE if no additional financing is needed. Otherwise select Contract For Deed, Lease To Own, Trust, Option To Purchase, or See Comment Below to make a special request or provide detail explanation.

Sale contingent on sale of property:  Select Yes or NO.   If a bank will be requiring you to sell your existing property before you can purchase this property you must select YES.      

Current Year Property Tax:  Select Seller Pay All, Buyer Pay All, Buyer/Seller Pro Rate, or See Comment Below to provide explanation.

Additional Info/Comment:  This is where you will explain any uncommon, extraordinary, or special consideration in detail, ie.,

Notify me of higher offers:  Check this box to be notified by text or email in the event of a multiple offer AND when there is a higher competing offer. If you do not check this box, you will not be notified. 

Review/Submit Be sure to select Review and confirm that the price and terms of your offer are correct. Make sure the numbers and comments are as intended.  Your offer summary is not final.  If your offer is selected the terms and conditions are subject to further negotiation.  If you have questions please contact the listing agent.

When many think about writing offers the visual isn’t often friendly.  That’s because real estate offers are often written at the last minute or with little advance notice to the parties, ie.. the buyer, seller, or agent.  With working schedule, language barrier, mobility, and transportion issues adding to the obfuscation it’s simple to see why the real estate offer process is one without transparency, accountability, or speed.  And yet for millions of real estate professionals the offer process has become an excercise for creating value. 

However we ask:  How can value be created when the cause of 80-90% of problems in the real estate transaction including loss of offers, discounted offers, missing offers, miscommunication, lost communication, emotional and situational conflicts occur while agents are communicating the offers?  In other words the agents are often a component in a series of activities, questions, and conflict leading to most problems.              

Typical scenarios might go as follow:

An offer deadline is 4:00PM today and buyer is scheduled to see at 2:30PM.  Agent must complete showing, provide disclosures, and assist the client in writing a 20-50 page offer in 15-30 minutes.  Following the initial offer the agent may be required to draft amendments, addendums, and other disclosures.  Would it be reasonable to expect any agent to provide optimal service in 15-30 minutes?    

It’s 10PM on Friday and buyer is ready to make an offer.  Unfortunately seller is traveling and thus is unable to entertain any offer until Monday.  How can buyer know which offers he will be competing with?     

Seller has received 15 offers and must comb through every single page one by one, making sure not to miss out on any detail.  How many times have you read a purchase agreement from start to finish?    

The real estate agent says there are multiple offers but there’s no physical evidence of the other offers.  How does one know?   

There’s a multiple offer scenario and everyone is in panic.  The buyer is excited and seller is going by what the agent is telling him/her.  Due to the accelerated nature of multiple offers, there’s no way of knowing exactly what the terms of other offers might be.   All parties must make decision based on blind offers and blind facts.  If the buyer doesn’t know what all the competing offers are and seller doesn’t know what all the potential buyer wants and needs are; how could the best market offer be reached?      

In situations involving foreign buyers or buyers without access to email, transportation, or physical mobility the issue of multiple offers and offers in general magnifies and are ripe with hidden traps with many buyers regularly losing out on properties due to blind offers.     

Finally, after all the excitement and “time wasted” only one of the many offers received will be accepted.  

It’s easy to see how milions of offers being rejected and hundreds of millions of pages getting tossed without transparency is a serious concern in the real estate industry.  And yet,  until now — there’s no accountability or desire to improve.  

NoDiscount.com is proud to bring the most efficient offer making solution to the industry.  

Each year hundreds of thousands of motivated and highly-inspired individuals across America and throughout the world choose to become licensed real estate agents for legitimate reasons:  HIGH PROFIT FOR LITTLE WORK.  Over the years millions have invested thousands of dollars each in education, membership dues, tools, and communication expenses to compete for clients.  However unbeknownst to many the agent attrition rate continues to climb 70-80% each and every year.  What this translates into is that most consumers will place trust in real estate agents who will not be around in 1-2 years due to extraordinarily high competition.   

The 20% agents who survive the two year period are well-known and trusted by communities.  Unfortunately they are entangled in a system that is s-l-o-w and costly.  The cycle will never end until consumers make better choices.      

In his book HOW TO BUY OR SELL YOUR HOME IN 1 MINUTE Founder/Broker Kosol Sek explains why the industry has been hungry for change but systemic contraints, whether directly or indirectly, continue to stifile innovation to benefit consumers.   

One of the main constraints is that almost all real estate agents operate as independent contractors.  This means brokers may not require agents on how and when to conduct business.  And to maintain distance from anti-trust ( break federal and state laws ) scenarios real estate companies are prohibited from discussing or requiring how much commission agents charge.  

So what is the one piece of fact that all real estate agents already know? 

Despite routine excersises by high profile agents to promote figurative values using open houses, online tools, expensive billboards, bus benches, and neighborhood mailings the real value is in the indisputable fact that 80-90% of buyers are exposed to properties in the first 12 days.  This statistic has been around for nearly 20 years and continues to drop with increasing smartphone adoption.  While the trend should be central to industry innovation, billions are invested and lost in high cost tools to prolong the slow and costly ways of selling real estate. 

A quick search on Google or any search engine for “real estate lead generation” provides empirical evidence that real estate agents are being sold facebook and social media tools to make clients think they are working hard.  There is no focus on helping agents to sell properties faster and cheaper to benefit consumers but rather to continue the currently high cost and slow real estate business.      

In recent months the hesitation by industry titans to change has invited disruptors to enter the market with billion dollar innovations that do not benefit consumers.  One such innovation, the instant iBuyers, singularly promises to remove the home selling headache and frustration by selling to them at a discount.  The promise is a quick sale and flexible closing date in exchange for a discount off estimated market values. 

What they do not disclose is that millions of real estate agents know that home selling today doesn’t require weeks or months like they did 5-20 years ago.  A well-listed property can receive the maximum offers in just 12 days.   In fact a quick search of public records of properties sold to instant cash buyers show closing dates to average 21-45 days whereas to retail buyers 21-60 days.  The marginal difference between selling to an instant buyer at a discount in 7 days vs. comparing the full market offers in 12 days is miniscule that consumers have been sold a litterally “non-existent” fear that cost $10,000 to $50,000 — OR MORE.

Between the traditionally hesitant real estate companies and today’s tech-heavy “new ideas” not much have changed.  

For nearly 17 years we’ve been perfecting a system to create demands for properties by focusing on the initial 12 days.  The internet accelerated our efforts by automagically compressing buyers in just days.  While millions of real estate agents already know this the systemic nature of the business makes it nearly impossible for them to fix.  Because the current independent contractor nature of a centralized business model ( where every agent offers the same ) keeps everything s-l-o-w and costly.  

To innovate would require each of the millions of agents to simultaneously invest tens of thousands to implement new ways to benefit consumers.  This is likely never to happen since many enterred the business on the lure of high profit with little work.        

NoDiscount® is proud to recognize the 12-day aspect of home selling and dedicate our innovations to delivering more offers, higher offers, and faster offers during the initial days on market.

According to the finance site Bankrate.com the average American owes $92,727 in various kinds of debt ranging from credit cards, student loan, car loan, and other personal debts.  

Average American Debt | Bankrate

Imagine what you could do with debt if you could put an extra $10,000 to $50,000, OR MORE in your pocket when you buy or sell a home?  

In fact that’s why we created NoDiscount.com.  When you are not throwing away thousands of dollars of your hard-earned money you can put it back in your pocket to reduce debt.     

The Founder of NoDiscount.com never intended to become a licensed real estate agent.  Having run a highly successful internet website in the early 2000s Mr. Sek amassed over 300,000 subscribers to his site AmazingSecrets.com.  Before Youtube and today’s social media, it was the destination for learning insiders tips, secrets, and insiders information.   He discovered that 90% of the tips and secrets were related to real estate and home selling.  From there the concept for NoDiscount® was developed, incubated, and refined over the years.   

We didn’t start out as a real estate company, we started out wanting to empower you so that you can put $10,000 to $50,000, MOR MORE back in your bank.

Updated November 21, 2021 with final sale price. 

Perhaps the biggest news in the real estate industry since we began testing the NoDiscount® model in 2003 came six days ago when the home valuation Goliath Zillow announced the company will be exiting the instant home buying business.  Between 2011 and 2021 Zillow amassed millions of LIKES and FOLLOWERS for its Zestimates on over 100 million homes in the United States.  

“The unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” Zillow CEO Rich Barton said in a statement. 

The company lost over $381 million on the business in the third quarter, accelerating the overall business net loss to $169 million.  

Out of respect for our colleaque in the industry it would not be appropriate to echo the snarks that have gone viral regarding Zillow’s valuation algorithm and business model.  As with any business innovation the less informed or misinformed are quick to scream SCAM without empathizing the years invested on trial and error and millions to develop SOPs and product positioning in a most competitive market.  In its attempt to command marketshare and become the de facto for everything real estate and in particular; the place for market values — Zillow strained its muscles and injured many investors — who believed in the Zestimate product.

Real estate professionals with experience in the industry have known all along that real estate values are determined by humans.  Real estate was never and could never be valued by a single number displayed on computer screens.  Just as stock and crypto prices can fluctuate 5-100% in a day’s time, real estate has a value range.  Zillow’s attempt to compress the human desires into binaries has proven there is more to buying low and selling high than placing a listing on the market.   

We start with a recent case study:

Property located at 18** Carnelian LN, Eagan, MN 

Market Values:  $306,240 – $397,760

AVM:  $352,000

A quick search of public record confirms the property was  acquired by Zillow Hms Prop A De Statutory on June 11, 2021 for $328,300.  Thirteen days later Zillow relisted said property through a traditional real estate company at $355,000.  

A pricing history reveals a series of discounts:

June 24, 2021 LISTING PRICE $355,000

July 9, 2021  discounted to $349,900

July 24, 2021 discounted to $339,000

August 8, 2021 discounted to $329,900

August 20, 2021  discounted to $326,300

September 3, 2021 discounted to 314.900

September 17, 2021 discounted to $309.900

September 24, 2021 discounted to $304.900

October 5, 2021 SOLD under contract.

UPDATED NOVEMBER 21, 2021 —  Sold Price Nov. 12, 2021  $296,100 with Seller Contribution $6,600 ( $289,500 )

_______________________________________________________________

UPDATED:  NOVEMBER 21, 2021 — Zillow lost  $38,800  ( excluding real estate commission + repairs + holding cost + loan interest ) which could be an additional $15,000 to $25,000.  POTENTIALLY A NEGATIVE $53,800 TO $63,800.   

In all likelihood Zillow assumed the company could make a purchase for $328,300, spruce up appeal, and relist for $355,000.  Had Zillow’s optimism realized the property could have profited $26,700 gross before commission and cost of renovation.  Instead the reverse happened and the company today stands to lose at least $23,400 ( $328,300 – $304,900 = $23,400 ).  Discount after discount the above property like many Zillow properties across the US did not appeal to buyers.  In this scenario a total of seven discounts were taken over a 12 week period and yet without success.  It should be noted that the Zillow mistake occurred during one of the hottest real estate market in US history.  Further, the above figures exclude real estate commissions to be paid by Zillow, thus final loss could be significantly higher. 

We must be mindful that this is one case study with many more across the country.  In Phoenix alone, Zillow had 250 listings at the end of October with a median price of 6.2%, or $29,000 less than what they were bought for, according to research from Mike DelPrete – Real Estate Tech Strategist (mikedp.com). 

It wasn’t due to Zillow’s algorithm that single handedly ended the Z’s buying business model but the difficulty for the company to create demand for properties and generate offers.  Analysts and critics of Zillow completely ignored a 90-day FHA title seasoning requirement which disqualified homebuyers from FHA financing.  According to FHA FY 2020 report, FHA insurance on purchase transaction forward mortgages served 817,847 homebuyers, 83.1 percent of whom were first-time homebuyers.  On average the current FHA rule disqualifies 13.6% of buyers from home purchases and in some areas as high as 40%.  This factor works against Zillow’s business model of buying and reselling properties in 2-3 weeks.

Hundreds of real estate brokers and investors who flipped homes using NoDiscount.com between 2003-2005 understood the FHA restriction better than anyone.  Zillow may have overlooked.       

When attempting to assign a NoDiscount® score to randomly selected Zillow home listings we identified some of the lowest scores in the industry.  A low NoDiscount® score has the highest probabilty of selling at a discount.  This fact coupled with our observation that Zillow’s practice of listing with traditionally high priced real estate brokers created the straw which broke the camel’s back. 

SO WHAT CAN WE LEARN FROM ZILLOW’S MISTAKE?

There are three:

1)  The $300 million lesson the industry should have learned and consumers should take note of is that emotions, wants, and desires play a significant role in what buyers pay for properties.  For example the 90-day FHA financing restriction resulted in fewer buyers and fewer offers.  2)  The way buyers buy homes today has changed and selling properties the same way from 10 or 20 years ago will force properties to sell at discounts.  3) Zillow typically listed with traditionally high cost Realtors which leaves little profit to offer incentives or assistance for buyers to make offers.     

Zillow is not to be pointed for its business model as many industry players were equally involved and responsible for Z’s mistake.  As detailed in our WE’RE TAKING THE SCARY OUT OF REAL ESTATE report and book HOW TO BUY OR SELL YOUR HOME IN 1 MINUTE it’s not possible to change the real estate industry without also changing the ecosystem which created the circumstances for Zillow’s mistake.  

The real estate industry owes Zillow a well-earned recognition for demonstrating that technology and artificial intelligence with age old inefficiencies cannot sell properties.  Zillow gifted the industry the perfect case study illustrating that taking discounts is not the way to sell properties.  Alas, discount after discount forced Zillow out of the home buying business because not just Zillow but many agents who represented Zillow played a role in the systematic and synergistic cause of selling at discounts.     

Final Thought:  A typical real estate owner who sells only one or two properties in a lifetime can benefit by learning from Zillow’s mistake.  It is figuratively optimistic to assume that buyers will pay for the same or more for like properties in the same area but it is literally impossible because each buyer in every market brings with them unique circumstances, wants, and needs.  With a hot real estate market and lowest interest rate in history Zillow was unable to capitalize using its latest high tech tools.  The company purchased and sold nearly 20,000 properties through traditionally high cost ways of selling real estate which took away incentives to generate more offers, higher offers, and faster offers.  The discounts killed Zillow’s home buying business.             

Reference: 

Zillow’s home-buying debacle shows how hard it is to use AI to value real estate – CNN

Zillow’s exit from the home-buying business earns a wave of downgrades from surprised analysts (cnbc.com)

Zillow’s Growth Prospects Dim as It Exits Home Flipping – WSJ

What does Zillow’s exit tell us about the health of the iBuying market? | TechCrunch

Zillow exits home deals; it had a small presence in Twin Cities real estate – StarTribune.com

Zillow Statistics from Ipropertymanagement 

https://www.hud.gov/sites/dfiles/Housing/documents/2020FHAAnnualReportMMIFund.pdf

NoDiscount.com might be the newest kid on the block in 2021; yet, we certainly have the most experience in generating multiple offers for properties.  After searching the web for social proof we’d thought you might be interested in reading what hundreds of sellers across the United States, Australia, New Zealand, and Canada have said during the early days of the NoDiscount® pilot.  

20 years of NoDiscount

Many of these sellers were not inexperienced homeowners who sold only one or two properties in a lifetime.  Most were professional investors and real estate agents who earned a living selling properties for $10-50,000 profit over what they paid for.   In the early days of NoDiscount® our system was  complex and required sophisticated knowledge of the real estate process.  As detailed in the book HOW TO BUY OR SELL YOUR HOME IN 1 MINUTE, we extrapolated each component of our secret selling process and detailed why each component has over the years continually improved to generate offers for properties fast.  While the fundamentals of the process have not changed in 20 years as registered with the U.S. Copyright Office, we have added two powerful elements that will revolutionize the way real estate is sold forever.  

A first significant change is the inclusion of the Smartphone to control web-based features allowing NoDiscount® to setup in minutes.   

A second significant change is our partnership with licensed real estate professionals to work with users everywhere.          

Over the years we’ve listened to our customers and understood the value of creating demand and market timing.  We waited for  the United States Government and Realtor Industry to reach an agreement to remove competitive constraints for accelerated innovation to happen.   

In 2021 we relaunched NoDiscount.com to take the SCARY out of real estate so you can turn your smartphone into a real estate agent.  We’ve come a long way and our selling process will continue to innovate with the latest technologies to execute our scientific home selling process. 

Thanks for making NoDiscount® the most powerful home selling system in the world.  We’ve made home selling so-so easy.  Just set it and sell it!

“While homebuyers have shifted their buying behavior to websites, today’s sellers and agents still use the same S-L-O-W 100 year-old offer process – The equivalence of paying through a fast food drive-thru and asking customers to wait 1 hour for the food.” — Founder of NoDiscount.com 

It’s true — The Smartphone has revolutionized our world in the past 10 years in amazing and remarkable ways.  Sophisticated and complex tasks once took hours to complete today takes just seconds.  For over 100 years every attempt to speed up the process of buying and selling a home has failed.  And every attempt to reduce real estate commission has been met with resistance and often competitive restraint.  Why?  Because while the world has changed rapidly; frankly — buying and sellng a home remains slow and tedious, and costly. 

Today, while upto 90% of buyers use the web to search homes and esign documents the process in which real estate agents handle pricing, response, offers, conversion, escalation, safety, and systematize the buying and selling experience has not changed in over a century.  At NoDiscount.com we recognize that at least 75% of the headache and COST of home selling is caused by the offer process.  Did you know that most buyers will have their offers rejected 3-15 times before an acceptance? 

When one considers a typical offer can be 50-100 pages long; cumulatively, hundreds of pages and hours of headaches between buyers and sellers go to waste for every property for sale on the market.  The sheer number of hours wasted and complete lack of transparency should be compelling reasons for the industry to innovating how offers get submitted, presented, and received.  But it hasn’t.   

And as offers get rejected buyers and sellers must still pay for time loss and frustration — sometimes suspicion —  that one or more offers failed to be presented properly, timely, or correctly.  In cases of multiple offers sellers sometimes choose the wrong buyers and sell for much less than they could.  Conversely buyers regularly fail to win the home they truly want due to offers not reaching sellers or presented properly.  .      

Isn’t it time we have a complete makeover in how the real estate industry handles offers? 

WE THINK SO. 

Your Smartphone is 100,000x faster than the fastest computer that landed mankind on the moon in the 1960s, and yet, the industry hasn’t manifested itself to bring speed and savings for the benefit of consumers.  Instead we see large corporations use technlogy to keep cost high and services slow while obfuscating the inexperienced consumer with a false sense of complexity.  

At NoDiscount.com —  when you turn your smartphone into a real estate agent every listing will display a special QR code from QR CODE MONKEY on the property detail page.   

With any Smartphone a buyer simply scans the code — AND make offer!

After the initial setup and account approval, it should take less than one minute to submit one offer.  Within seconds buyers and sellers will receive confirmation that offers have been received.  Sellers can login to view, compare, accept, or reject offers in real-time. Buyers can login to view and see the status of all offers and quickly and conveniently compare to previous offers submitted.      

Got questions?  Turn your smartphone into a real estate agent!®  SCAN the QR code at the top of any page for more info.  

Want in on a secret?    

Sellers can share their QR code and receive offers directly from buyers.  By doing so buyers may submit offers while bypassing the need to pay real estate commission.  

Want another secret?  

Post the QR code on your social media pages and drive even more buyers.  Buyers simply point their smartphone camera to the QR for details or to submit an offer.