Definitely not another housing bubble. No way.
Zillow surprises investors by buying up homes
51–60 of 93 posts
Re: Zillow surprises investors by buying up homes
#52Earlier quoted context omitted.
Agreed. The surprisingly bespoke nature of home translations definitely provides an opportunity for this to be a win/win. Zillow wins by buying an asset it has more information on the true market value of, then providing an easier, economies of scale on the associated services (inspection, legal, repair, etc), then being able to offer a standardized product to home buyers. Buyers win from taking a lot of the uncertai…
Let's not forget there's a standard 6% commission in US real estate transactions I never really understood this, the last time I sold a house in the UK the fee was 1.5% and only on my side, the buyer pays nothing.
You don't need to pay it, but people feel that it is worth it/ You can definitely get a broker who works by the hour for you.
Re: Zillow surprises investors by buying up homes
#53Buying 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…
What's peculiar is that they don't use OPM for this. There are literally a million of these flippers out there. Why not just work with them to buy it and sell it, and Zillow gets a percentage for providing the lead? It's like zero risk for Zillow, all upside.
They must be making a lot of money from this if they're going it alone. The 7% drop is probably not because of riks here but because it signals lack of growth.
Re: Zillow surprises investors by buying up homes
#54Earlier quoted context omitted.
Agreed. The surprisingly bespoke nature of home translations definitely provides an opportunity for this to be a win/win. Zillow wins by buying an asset it has more information on the true market value of, then providing an easier, economies of scale on the associated services (inspection, legal, repair, etc), then being able to offer a standardized product to home buyers. Buyers win from taking a lot of the uncertai…
Let's not forget there's a standard 6% commission in US real estate transactions I never really understood this, the last time I sold a house in the UK the fee was 1.5% and only on my side, the buyer pays nothing.
Did you know that "realtor" is a registered trademark?
Re: Zillow surprises investors by buying up homes
#55Buying 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…
Real Estate is one of the older investment games in town - It is what I am basing my retirement on. I wonder how this will impact disclosure rules versus sales advertising? Existing model to use, or adopt another industry's? Will this cause fears of LIBOR-style manipulation? This will be interesting to watch... edit: p.s. Maybe another chance to make a Carfax-like system for homes? In the US market, I find there is n…
What do you envision for this Carfax-like system for real estate?
What info would be available that you could not see via Zillow or the MLS listing?
Re: Zillow surprises investors by buying up homes
#56Earlier quoted context omitted.
Agreed. The surprisingly bespoke nature of home translations definitely provides an opportunity for this to be a win/win. Zillow wins by buying an asset it has more information on the true market value of, then providing an easier, economies of scale on the associated services (inspection, legal, repair, etc), then being able to offer a standardized product to home buyers. Buyers win from taking a lot of the uncertai…
Let's not forget there's a standard 6% commission in US real estate transactions I never really understood this, the last time I sold a house in the UK the fee was 1.5% and only on my side, the buyer pays nothing.
1) The 6% commission is negotiable.
2) In the UK, the buyer pays stamp duty (tax) on the purchase.[0]
3) You can put a bid on a property in the UK and it's non-binding (until exchange)[1]
In other words - very different markets with very different dynamics.
[0] - I forget the percent, but it's material. This effectively disincentives people from buying, making the market less liquid.
[1] - This is frankly ridiculous.
(I've bought and sold in both US&UK markets)
Re: Zillow surprises investors by buying up homes
#57Earlier quoted context omitted.
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.
What specific details would they have that other's don't. I don't know how prevalent FSBO is on Zillow in some markets, but in mine it's extremely limited. I'd be shocked if it made up 5% of the residential market, probably closer to 1%.
The rest of the listings are from MLS systems and they pull housing data from county systems. For that, I'd assume there is a data broker and Zillow isn't integrating with thousands of counties. If that's the case, then both the MLS and county data can be had by anyone. With that information, you'd get lot details, house details, listing history, county tax valuations and sales history.
What other data do you need?
A lot of house flippers are agents because they get the MLS listings ahead of the public and can move faster on them. I don't know when Zillow gets their MLS data, but listings almost always hit Realtor.com a day before they hit Zillow, so I don't see that as an advantage either.
Re: Zillow surprises investors by buying up homes
#58Competition with its own customers too. Isn’t this a conflict of interest?
As long as this is disclosed, it should be okay.
Re: Zillow surprises investors by buying up homes
#59Earlier quoted context omitted.
Or Zillow has access or insight to data that general property investors do not, thus driving abnormal returns.
They even know unlisted data, like which buyers are currently looking. If they combine it with data from social network partners and other providers they can know the school-friend networks of the buyer's kids, church affiliations, how racist they are, etc.
Social networks don't sell data like that
Re: Zillow surprises investors by buying up homes
#60Earlier quoted context omitted.
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.
What specific details would they have that other's don't. I don't know how prevalent FSBO is on Zillow in some markets, but in mine it's extremely limited. I'd be shocked if it made up 5% of the residential market, probably closer to 1%. The rest of the listings are from MLS systems and they pull housing data from county systems. For that, I'd assume there is a data broker and Zillow isn't integrating with thousands…
What's FSOB? Was it just a typo of FSBO (as in for sale by owner)?