Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#1

Post by twohanded » Thu, Apr 12, 2018, 10:31 PM UTC

Zillow Launches Home-Flipping Program in Phoenix and Las Vegas
bloomberg.com

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#2

Post by JumpCrisscross » Fri, Apr 13, 2018, 1:15 AM UTC

How will they hedge risks related to a national housing downturn?

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#3

Post by twodave » Fri, Apr 13, 2018, 1:38 AM UTC

JumpCrisscross wrote: post #2

How will they hedge risks related to a national housing downturn?

I'd imagine the same way other real estate investors do--buying up foreclosure inventory from banks.

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#4

Post by m3kw9 » Fri, Apr 13, 2018, 1:53 AM UTC

Is gonna be like stocks, you don’t even need to see the product. Is just a number on screen now

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#5

Post by subpixel » Fri, Apr 13, 2018, 1:55 AM UTC

The article states the model is not to profit through appreciation. So where is the profit?

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#6

Post by pfarnsworth » Fri, Apr 13, 2018, 1:56 AM UTC

Generally, things like this mark a top in the market. Zillow will get caught with a ton of inventory that they can't sell, and then take a huge loss trying to unload them for cash. It probably won't happen right away, but I can totally see it happening in the next year or so.

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#7

Post by mwnivek » Fri, Apr 13, 2018, 2:00 AM UTC

subpixel wrote: post #5

The article states the model is not to profit through appreciation. So where is the profit?

From the article:

> Unlike traditional home-flippers who bet they can make money on home appreciation, Zillow plans to profit by charging sellers a fee in addition to agent commissions.

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#8

Post by QuarterReptile » Fri, Apr 13, 2018, 2:16 AM UTC

JumpCrisscross wrote: post #2

How will they hedge risks related to a national housing downturn?

Maybe if they're fast and buy up enough, they can get bailed out in the next housing downturn. Even better if they can gain recognition as a bank of some sort before that time.

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#9

Post by what-the-grump » Fri, Apr 13, 2018, 2:22 AM UTC

pfarnsworth wrote: post #6

Generally, things like this mark a top in the market. Zillow will get caught with a ton of inventory that they can't sell, and then take a huge loss trying to unload them for cash. It probably won't happen right away, but I can totally see it happening in the next year or so.

It’s what happened to all the billionaires that got into the NYC market in 2007. Sold everything at 50+% loss and shit on the economy.

Re: Zillow Launches Home-Flipping Program in Phoenix and Las Vegas

#10

Post by subpixel » Fri, Apr 13, 2018, 2:33 AM UTC

mwnivek wrote: post #7

subpixel wrote: post #5

The article states the model is not to profit through appreciation. So where is the profit?

From the article: > Unlike traditional home-flippers who bet they can make money on home appreciation, Zillow plans to profit by charging sellers a fee in addition to agent commissions.

So they plan to make offers on houses near market rate, invent a "fee" to account for the fact that they won't actually be paying market rate, and then turn around and sell the same house at market rate, pocketing the fee.

For this to work at scale a lot of people must be in a situation where they can't afford the holding costs associated with waiting for their house to sell for what it's worth. Or a lot of people's houses have appreciated sufficiently that Zillow's fee is a non-issue. If anyone knows if this is true, I guess Zillow would.