Zillow recently released a study claiming that sellers who chose to sell their homes off the Multiple Listing Service (MLS) left significant money on the table—an estimated $1 billion over the past two years. According to their research, homes sold off the MLS typically sold for $4,975 less than those listed publicly, with the financial impact varying by region. Zillow argues that listing a property on the MLS ensures maximum exposure, increases competition among buyers, and ultimately leads to higher sale prices. However, while the study presents a compelling case for using the MLS, it overlooks several key factors that impact real estate transactions. Below, we’ll break down what Zillow didn’t tell you—important considerations that could paint a different picture of off-market sales and why they remain a valuable option for many sellers.
Zillow is a widely recognized online real estate marketplace in the United States, offering consumers access to property listings, home value estimates, and various real estate tools. While Zillow provides a platform for buyers and sellers, it does not employ real estate agents directly. Instead, the company generates revenue by selling advertising space and leads to real estate professionals, including agents and brokers, based on listings from multiple listing services (MLS) across the country. Notably, Zillow ventured into the home-flipping market through its Zillow Offers program but ceased this operation in 2021 after incurring significant financial losses. wsj.com
Regarding the article you shared, it’s essential to approach Zillow’s analysis with a critical perspective, considering potential biases and omissions:
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Financial Interests: Zillow’s primary revenue model relies on advertising and lead generation from MLS-listed properties. Promoting MLS listings aligns with their business interests, as it sustains their income stream. This financial dependency may influence their portrayal of off-MLS sales negatively, as such transactions do not contribute to their revenue.
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Commission Structures: The article highlights that homes sold off the MLS typically sold for $4,975 less than those listed on the MLS. However, it doesn’t account for the reduced commission fees often associated with off-market sales. Sellers might accept a slightly lower sale price in exchange for paying lower commissions, potentially resulting in comparable or even superior net proceeds than through traditional MLS listings.
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Buyer Agent Commissions: With evolving industry practices, some buyer agents now require their commissions to be paid directly by the buyer, especially in off-market deals. The article doesn’t consider this shift, which can influence the overall financial dynamics of a sale.
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Seller Motivations: Off-market sales can offer advantages such as privacy, speed, and convenience, particularly for properties needing significant repairs or for sellers seeking discretion. The article doesn’t delve into these seller motivations, which can justify choosing off-market avenues despite potential price differences.
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Agent Representation Details: The study mentions that some off-MLS sales involve the same agent or agents from the same brokerage representing both buyer and seller. This dual agency can impact negotiations and pricing. The lack of clarity on whether transactions involved agents from different companies leaves out a critical factor that could influence sale outcomes.
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Market Variability: Real estate markets are inherently local, with varying conditions influencing sale prices. The article provides nationwide median figures, which may not accurately reflect specific regional markets where off-market sales could be more prevalent or advantageous.
In summary, while Zillow’s research presents data suggesting financial drawbacks to off-MLS sales, it’s crucial to recognize the company’s vested interests in promoting MLS listings. Sellers should weigh the potential benefits of off-market transactions, such as reduced commissions and increased convenience, against the possible price differences. Consulting with a trusted real estate professional can provide personalized insights tailored to individual circumstances.
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Robbyn Battles