Zillow is terminating closing contracts, citing coronavirus concerns
The concept and perceived benefit of iBuyers rests in the little “i” in front of the word. It stands for “instant,” because when a homeowner chooses to sell their home through an iBuyer, they simply fill out a form, get a bid and can sell within a short period of time.
For the seller, this means no staging, no open houses and no need to wait on the buyer to get their affairs in order. But what happens to the seller when iBuyers suddenly stop buying?
Over the past few weeks, iBuyers across the board have been pressing pause on the service, citing coronavirus concerns.
In a town hall conference call on Monday, Zillow Co-Founder and CEO Rich Barton said that the company would work with customers the best that they can, given the situation.
“We are working with existing customers to cancel our existing contracts to the greatest extent we can. We’ll do this in a humane way,” Barton said. “This is clearly a material adverse change, so we’ll be taking that position and then evaluating, on a case-by-case basis, what we actually do and using some financial incentives to largely extricate – to hopefully largely extricate ourselves from those transactions.”
Meanwhile, Jeramiah Dooley is trying to sell his townhome in Charlotte, North Carolina, through Zillow Offers. He told HousingWire he chose Zillow in comparison to other iBuyers because it was the best offer he received.
“We took [the offer] and signed the contract on January 13, and they gave me up to 90 days to close which was perfect because I am scheduled to actually move on the 30th of this month,” Dooley said. “Then the day before yesterday, I got the same email that looks like everyone has gotten, basically blaming the latest public health orders issued for a wholesale cancellation of every house that Zillow had under contract to buy.”
Dooley said he was given 48 hours to choose between two options from Zillow. Zillow would either give him $5,000, which is $4,000 more than the earnest money that they would forfeit for breaking the contract, or they’d pay all of the sellers costs for a local Realtor group to put the house up on the market.
After he accepted the offer to take the $5,000 payment, Dooley was sent a “Coronavirus Termination of Real Estate Agreement” from the iBuyer.
Now paying two mortgages, Dooley said he has another important decision to make.
“I can refinance the mortgage on the house that was under contract but then I lose all of the equity that is in it,” Dooley said. “And I don’t realize anything out of the transaction but the mortgage gets lower. I can try to rent it out, or I can just hold on for however long it takes for the housing market to get back to normal, and then figure out if there’s a market out there to buy it, and I don’t really have a whole lot of choices.
According to Dooly, if the iBuyer didn’t hear from him in 48 hours, Zillow would pull the contract.
This was the same case for Crystal and Nicholas Thornton, who used Zillow Offers in Marietta, Georgia, to sell their home quickly and move into a new one with profits from their current house as a downpayment.
The Thorntons were also offered the two choices, but were disappointed in the outcome of the whole transaction.
“We’re going to stay put because part of the reason that this was so important is because once we sold this house, that also helped us with our 20% down payment,” Thornton said. “That was the main reason why we went with Zillow because if you do it the traditional way, you basically have to wait and hope that people come look at the house. Once you’re on the contract, they follow through with it.”
“We’re not in a position where we can just put our house up for sale and then purchase another home only to have two mortgages, because we want to have that 20% down because we don’t want that PMI insurance,” Thornton continued. “So that’s one of the main reasons that we went with Zillow Offers, because with what we were trying to get, and then the school zone, size, and the price, those are rare. So this was just supposed to work, there’s no reason this shouldn’t have worked.”
In a statement from Zillow Spokesperson Viet Shelton, the company said they hope to pick things back up again once the COVID-19 dust settles.
“We are incredibly sorry for the inconvenience and disruption people may experience as a result of our decision to pause home buying through Zillow Offers,” Shelton said. “This is not a decision made lightly, and was solely driven by COVID-19 health concerns and resulting market uncertainty. In addition to providing added financial support to help each seller, we are also doing our best to support our buyers in contract who can no longer purchase their home from Zillow. These are unprecedented times and we are committed to re-engaging customers through Zillow Offers as soon as it is viable to do so.”
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