All That Glitters is Not Gold

This well-known phrase first originated in the play The Merchant of Venice, by William Shakespeare written about 1596. The meaning is pretty straightforward; just because something glitters, or looks attractive, doesn’t mean that it is actually valuable.

A few years ago, a new real estate business model burst on the market promising to revolutionize the way homes are sold. A couple of the most prolific names were Zillow and OpenDoor. The proposal was that these firms would simply buy your house at a fair price (at least fair to them!) and there were no repairs or fees to pay. You simply sign the agreement and receive your check. While that looked really attractive in the beginning, in reality, it was not. The collective term for this model is “ibuying”.

Last week the Federal Trade Commission took action to stop OpenDoor from “Cheating potential home sellers with misleading claims.” www. FTC.gov/news-events. OpenDoor was fined $62 million dollars for their past practices. It seems that unsuspecting home sellers actually received thousands less than what their homes were worth.

Last fall, real estate behemoth, Zillow announced that it was suspending it’s Zillow Offers program which purported to simply buy your house without the usual hassles and costs. It is reported that when Zillow suspended its program, it was sitting on 7,000 homes that it had purchased, and when they were sold, they were taking huge losses. In Phoenix, 93% of Zillow owned listings were sold for less than what they paid initially, not to mention the property taxes, insurance, utilities, and maintenance costs.

Perhaps the most important thing to remember is that this all happened during a period of unprecedented price increases all across the country! If this business model is not sustainable during the best of times, it is certainly doomed to fail when we return to a more normal market.

The best buyer for your home is and always has been individuals that will love it and enjoy it for years to come, not a corporate giant that is looking to profit from you!

Jonathan R. Krause, President Gambino Realtors

815.282.2222 | GoGambino.com