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How Zillow's homebuying scheme lost $881M

fullstackeconomics.com

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Re: How Zillow's homebuying scheme lost $881M

#71

Post by Teknoman117 »

paxys wrote: post #57
jliptzin wrote: post #51

Earlier quoted context omitted.

There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.

Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing…

> Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it.

This is one of those things that really just confuses me. It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason".

And to whoever downvoted you, there are some places in the bay that are demanding 6 months rent up front in order to move in because they can't do much if you stop paying rent.

Re: How Zillow's homebuying scheme lost $881M

#72

Post by sokoloff »

bell-cot wrote: post #23

Reminds me of an old guy in knew back in the early 90's. His (quite nice) house was on a lot shaped like "well, that was the leftovers, after we gave all the other houses reasonable lots". Every year, the City tried to raise his property's assessed value by ~10% more than the neighborhood's average increase. And every time that his house sold (he had decades of records, to support his appeals of their over-assessment…

I've often wished that one avenue of appeal of a city assessment was an option given to the property owner to force the city to buy the property for 90% of what they assessed it. You could either go through the current appeals process or just sell them the house if they were way off.

Re: How Zillow's homebuying scheme lost $881M

#73

Post by advisedwang »

echan00 wrote: post #43

How do you lose money in a market where homes only went up?

The point of the article is the answer to this: they were systematically overpaying because the offers where they overestimate value were disproportionately taken up by sellers.

But also there's the cost of inspection, property insurance, title insurance, escrow fees, labour costs of making the sale etc. As the article says, trading houses is not like trading stocks.

Re: How Zillow's homebuying scheme lost $881M

#74

Post by aksss »

a1pulley wrote: post #62
thr0wawayf00 wrote: post #9

The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies,…

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today. A thought exercise: suppose that no new houses are ever built and that housin…

Sounds like the logical thing to do is start desiring a different place with sounder housing/zoning policy. Voting with your feet is a thing when you can’t win at the ballot box.

Re: How Zillow's homebuying scheme lost $881M

#76

Post by not2b »

uncomputation wrote: post #58
haroldp wrote: post #24

Earlier quoted context omitted.

> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price. > It's not that uncommon to see nearly entire neighborhoo…

> iBuyers are always low-balling Low-balling according to their own estimate (Zestimate) with imperfect knowledge. If this Zestimate overvalues a house, but the iBuyers assume “we are low-balling anyways,” they may find themselves in an iBidding war ending in the winner’s curse: whoever pays the most for the overvalued house wins. Not a problem though right? They overvalue some, undervalue others, it evens out. But,…

Yes, that's exactly it. The "Zestimate" is often way off, and the owner knows a lot more about it than Zillow does. If the Zestimate price is lower than the buyer thinks they can get, they won't take the offer. If the Zestimate price ignores the run-down condition of the house or other issues Zillow missed, they snap that up. So Zillow mostly wound up with the homes that they overvalued.

Re: How Zillow's homebuying scheme lost $881M

#77

Post by pharmakom »

eli wrote: post #56
lordnacho wrote: post #49

Earlier quoted context omitted.

This has perplexed me as well. Here in the UK, the top 1% of incomes is £175K. Assuming the bank lets you borrow 5x, and you're married to someone with a more middling income, you can borrow ~£1M. Yet there's a ring around London where it's hard to see any family homes that are under £1M. I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of peopl…

What's the top 1% for net worth though?

The problem is it is becoming impossible to be self made. Most people buying real estate in south east of UK and London have middling salaries but substantial help from their parents. The working class kid who made it to 70k/year? Tough luck.

Re: How Zillow's homebuying scheme lost $881M

#78

Post by prototypeasap »

I recall reading months ago that Zillow made cash offers with inspections waived, in order to expedite the process. I believe they had an algo which would access average repair cost which they would factor in the actual offer.

Each house needs to be inspected by multiple experts as there are many toxic properties with huge liabilities.

Re: How Zillow's homebuying scheme lost $881M

#79

Post by mentalpiracy »

paxys wrote: post #57
jliptzin wrote: post #51

Earlier quoted context omitted.

There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.

Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing…

Why should we use this as an example? You’re talking about people who are throwing away money by leaving assets idle - and implying that they obviously don’t know how to operate in this market.

Re: How Zillow's homebuying scheme lost $881M

#80

Post by dopamean »

jliptzin wrote: post #51
paxys wrote: post #40

Earlier quoted context omitted.

One can blame Airbnb, Zillow or whoever else, but the truth is that speculation in real estate and vacation towns have both been a thing for a very long time. If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what. The solution is out there in front of us but everyone prefers to dance around it.

There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.

Is this in the US? I've never heard of this before and am curious to learn more. It sounds like something that is nearly unenforceable.
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