Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Zillow surprises investors by buying up homes

techcrunch.com

Post reply on HN
Print view View original

31–40 of 93 posts

Re: Zillow surprises investors by buying up homes

#31

Post by jacobkranz »

malloci wrote: post #27
yodon wrote: post #8

Earlier quoted context omitted.

It’s rarely a good idea to compete against your customers

Isn't Amazon's marketplace similar in that regard? They compete with other sellers using Amazon's platform all the time. Ethically, it seems a bit fuzzy for me given that one of Zillow's big features is there zEstimate. How can they demonstrably prove they aren't tweaking that somehow for their own gain?

I'd argue that Amazon's customers are the buyers of the products, not the sellers using Amazon's platform.

Re: Zillow surprises investors by buying up homes

#32

Post by rejschaap »

dawhizkid wrote: post #25
cs702 wrote: post #2

Buying homes for subsequent resale is a capital-intensive, old-economy, bricks-and-mortar business. Zillow will borrow money to buy the homes, which means that (a) the clock will start ticking the instant each new home is purchased, and (b) this endeavor can be profitable only if proceeds from resales/rentals are sufficiently high to cover cumulative debt service costs -- in addition to all property taxes and ongoing…

I suspect part of the reason is that SV "unicorn" Opendoor ( https://www.opendoor.com/ ) is doing this and it wants a piece of the pie. Question I have is if whatever "pie" Opendoor is grabbing is actually sustainable in a recession/down market...seems like the worse case scenario is that they are left holding a bunch of illiquid inventory of declining value they can't get rid of.

It is interesting they even choose the same cities to start in.

Re: Zillow surprises investors by buying up homes

#34

Post by pyoung »

matte_black wrote: post #12
swlkr wrote: post #9

Earlier quoted context omitted.

It would be worth it for convenient financing options/on click, even if the price isn’t lower

No advantage though for a cash buyer?

Right, but if the point is to increase liquidity, the low hanging fruit is mortgage backed purchases. Homeowners will often take a smaller offer price in favor of cash because the closing process is easier/more certain. So Zillow might be trying to arbitrage that price difference between cash and mortgage purchases. And if they can find a way to scoop up part of the loan origination fees and the broker fees in the process, than I guess there could be some compelling revenues there.

Re: Zillow surprises investors by buying up homes

#35

Post by caseysoftware »

mjfern wrote: post #26
cs702 wrote: post #2

Buying homes for subsequent resale is a capital-intensive, old-economy, bricks-and-mortar business. Zillow will borrow money to buy the homes, which means that (a) the clock will start ticking the instant each new home is purchased, and (b) this endeavor can be profitable only if proceeds from resales/rentals are sufficiently high to cover cumulative debt service costs -- in addition to all property taxes and ongoing…

Or Zillow has access or insight to data that general property investors do not, thus driving abnormal returns.

That's my guess also. If they have details on the specific aspects in the specific markets that drives prices, being able to "jump on a deal" could work out well.

The question becomes if there are enough opportunities like that to move the needle for them.

If I had to guess, I would have guessed moving into Lending Tree's matchmaking area would be easier and have a better ROI.

Re: Zillow surprises investors by buying up homes

#36

Post by ericb »

If you read the Redfin 10k, they were doing this already as a service called "Redfin Now." I think it is interesting that two large data-driven pricing services are both pursuing this strategy. If you have better data, it might be possible to make money just on your pricing edge.

Re: Zillow surprises investors by buying up homes

#39

Post by matte_black »

prepend wrote: post #28
Finnucane wrote: post #15

Earlier quoted context omitted.

Likely you'd get the same deal as any other real estate developer in the flipping business would give you. They'd be looking for undervalued properties that can be fixed up and resold at a profit. Which means they're on the open market and you're bidding against other purchasers, like normal.

The problem seems to be that any homeowner getting an offer from Zillow would immediately know they had mispriced their listing and not accept. Unless Zillow has some new efficiency that no one else has (super contractors that can fix up cheaper than other investors, low cost capital) I don’t know how they will be able to outbid the market consistently as there aren’t enough dumb sellers with dumb agents out there. B…

A low priced home isn’t always a mispriced listing. It could be a fucked up home that’s super beat up and no one wants to touch. Or a seller that wants to get out immediately.

Re: Zillow surprises investors by buying up homes

#40

Post by loeg »

starchild_3001 wrote: post #33

How can zestimate be trusted if zillow is in the business of buying and selling homes? There's a reason why banks separate advisory business from the trading business.

It's already pretty inaccurate today (overestimates by about 10%[0]), so there's not much change there. ;-)

[0]: Very rough estimate, may be market-specific.

Post reply on HN