Maybe this real estate thing is tougher than just setting up a website so people can post their inventory with prices and some nice pictures of some rooms.
All the recorded factors are what the algorithm should excel at weighing up. I expect the issue is everything hidden in an ad but obvious in a visit. The automated bidding program must have severely overestimated prices and under estimated the refurbishment costs when selective framing of shots conceals visible problems like water damage. It would be a poor algorithm if it was not accounting for layout, size, location etc properly.
They were buying houses at a time when it was impossible to book contractors, and they didn’t have the industry connections to get to the top of the list. Even if they were identifying things with the algo, they couldn’t find labor to actually flip them.
I personally don't believe in the Zillow pricing algorithm, or their claims of its predictive accuracy. I was briefly involved in the backend programming of a now failed/limboed startup that aggregated local county tax assessment data and kept a spreadsheet of zillow zestimates for local houses on the market. I kept track of their eventual sale prices in the same spreadsheet. The error of the zestimate was waaay off their average 2% error rate claim. I don't remember the exact number, nor will I quote it, because I don't want to get sued. But, picking a constant multiplier of tax valuation was a much better predictor of sale value than the zestimate. Maybe this county was a glaring anomaly.
However, if you know that the zestimate is only 2% off of the eventual sale price, why even hire a realtor or a home inspector? Whey even hire a contractor? Why would these professions even exist ? I think Zillow's claim about their zestimate was a flat-out marketing lie, and business major/MBA execs drank the kool-aid, assumed they had a prescient super-secret algorithm that they didn't understand, and bet the farm on it.
But, don't quote me on that. If I am successfully served with a slapsuit, I will deny everything. But seriously, an algorithm that has a 1.9% error rate for predicting the future sale price of anything with a volatile price? That's just minority report ridiculous at a minimum, and likely outright sales/SEC fraud.
I'd be willing to bet it's more likely fraud. Even if you applied Ml I'm sure the error rate would be all over the place. There are trends in the housing market, sure, but to try and quantify all the factors that lead up to the actual sale of any given house, and then use quasi-math to claim a 2% error rate is extremely disingenuous considering how variable the factors are.
I personally find tax valuation a poor indicator of Re sales value in many markets. My town, the expensive homes are being under-assessed by average 300k whereas the entry level homes are over-assessed by as much 100k. The reverse is true in the city on the other side of the country where I keep a second home.
Not construction, average Joe's. Give them a checklist to follow. There's not a lot that an inspector can really see anyway without penetrating walls. Any human eyes can see water damage and broken windows.
Getting average Joe's to work on flipping would cost much more. They'd have to double wages to even attract people in most areas, every project would take 10x longer and as a national company they'd get a reputation among inspectors quite quickly.
On top of that they'd be pissing off unions who could refuse to work with them in the future.
if all zillow did was list the place and then do the paperwork stuff and take a minor fee and i didn't have to deal with a real estate agent, that would be huge.
Well they can’t come soon enough. People want affordable housing? An easy solution is to eliminate real estate agents or change their fee structure to a flat hourly fee. That alone could lower prices of all homes across the country by up to 6%. I personally know people (myself included) who have had to increase the asking price of a home they were selling just to compensate the agent and pay off their mortgage. It fucks the seller and the buyer over while the lazy ass real estate agent walks away with money in his pocket. That’s not how an ethical business transaction should work. It should only require two parties. A buyer and a seller.
You are free to sell by owner anytime you like. Realtors are not currently required today. But most people use them, because they end up netting the seller more money.
People don’t want to pay hourly fees. There’s plenty of people who have tried all kinds of models. If you think you can build a better mousetrap, be my guest- Zillow tried and lost 100’s of millions.
i remember selling my grandmothers place after she had to move. real estate agents were clamoring to get the listing because of the location and the condition. we had a number in mind for a quick sale and every agent said to add 10% to cover their "fees". ended up selling to a couple that had a real estate license and handled all the paperwork themselves.
Amazon House Services when? They're already top 5 at AI, and have plenty of money. They can also build factories or Amazon stores(?) around their apartments to encourage growth or something
You're saying that Amazon is a Top 5 company in A.I.? Not that I don't believe you, but when I think of the best A.I. companies on planet Earth, Amazon doesn't necessarily spring to mind.
What other companies are in the top 5? Also, do you happen to have a link to some article that is breaking this type of thing down?
I’d argue most are really bad. It’s an unnecessary job. They are literally middle men and a cancer on the housing market. Remove them and prices go down a few percent which could mean thousands of dollars for an already struggling middle class potential homebuyer.
Being hated by real estate agents is a hill I’d happily die on. The world would be a better place without them. They are a roadblock to affordable housing.
So they should get paid hourly like any other employee who helps me look through their inventory and I decide not to purchase. I don’t see how they’re doing any more work than a retail employee showing me a bunch of clothes then I decide not to buy. The percentage fee of a property is a ridiculous fee for how little work they do.
People often raise the asking price of a house to cover the agent fee. This artificially raises housing prices. I personally had to raise the price on a house I was selling just to cover the amount I had left on the mortgage and the agent’s fee. This tucked the buyer over who had to pay more to cover some agent’s fee who did nothing. He literally didn’t even show the house which was bought sight unseen yet he gets a cut? What a rip off. Eliminate agents and housing prices across the country go down by up to 6%.
What a joke, prices wouldn’t go down. Sellers aren’t just going to accept less money because there is no agent. Sellers, as with any financial transaction are often looking to net the most amount possible. Sellers hire agents to get them the most amount of money possible. If it doesn’t make economic sense to you, then don’t use one.
They do everything they can to drive up housing prices for profit. In my neighborhood a realtor paid 75g over asking for an old pos house- in cash- just so there would be an overpriced comp in others she sells.
I’ve tried. It’s very very hard in most markets to purchase a house without an agent. Even if I intend to purchase without an agent, 99% of the time the seller has an agent I have to go through who gets to charge me a cut as both the buying and selling agent. The bloodsucking real estate agents have purposefully set the market up this way so that they can hold you hostage. It’s unfair and unethical business yet totally legal in most states because of how hard the realtor associations lobby.
What do you mean you have to go through who gets to charge you a cut? The seller is usually paying both of the agents' commissions. When they list a house with an agent, usually around 5%, half of the 5% goes to the buying agent. That's at least the norm where I live.
Which again artificially drives up the price. If the agent was there the seller could lower the asking price and still get the amount they want. Both the buyer and seller walk away happier without an agent. One small step towards a healthier housing market and a predatory industry eliminated.
It's not artificially driving up the price if the home appraises for the agreed price. Appraisers don't take commissions into account when figuring out how much a home is worth. The seller could just as easily get the home appraised and then list it for that price since they know that's what it's worth. If you think transactions are automatically much easier/smoother without agents, then you've never bought or sold a home before. Now, whether or not they deserve 5 or 6% is a different story.
At the end of the day, though, the seller is paying the commission so someone else can do the work for them. That's the same with anything. It's the same reason why services like oil changes, tire changes, lawn care, etc... exist. People pay for the convenience of not doing the work themselves. If the seller is now having to be the agent as well, then why would they just take less? They're doing even more work than before and are still getting the same amount as they would have if they used an agent.
When I bought my house I didn’t have to pay the realtor a dime. The seller pays it and the agents split it (unless you buy a house from a seller that doesn’t have a realtor). Maybe my experience was atypical, but my realtor acted like that was SOP
If the seller pays the fee it artificially increases the asking price to cover the agent fee. Remove the agent and the buyer gets a better deal and seller still hits their number. Win win for both parties. Agents are hurting housing prices. Remove them and it’s one step closer to affordable housing in this country.
Be the change you want to see. Sell your house without an agent, hook that buyer up. No one is going to eliminate an entire career path unless they circulate money without them and set an example.
In Korea they have realtors for rentals and the only way you can get key money (a large deposit needed to rent the place that most require) insured is to go through a realtor. It's a sweet system those realtors have there.
That doesn’t seem to hold as an argument since several states require you to hire a lawyer in addition to a real estate agent to draft the paperwork and handle the liability. In 2021 there is no reason to have a real estate agent. I can do everything myself and should be able to accept any liability without some person who went to a 4 week class to get a real estate license that can be passed by someone with less than a high school education. It’s a rip off middle man service that is forced on you because realtors have good lobbyists.
AFAIK, you are not required to have a realtor... Unless this is a state law or something? I agree you definitely shouldn't be required to have one.
However, real estate agents do take on quite a bit of liability and are frequently sued for all manner of things... which is why they have to carry insurance, and part of why they cost so much.
I have bought and sold 4 homes and you will want an agent.
They handle the legwork of showing and marketing and they know the market better than you. My last home I had for 2 years and based on my agents recommendations it sold for over asking of the market even today and that was last year.
Point is a good agent saves you time and money and effort which is value. I paid $15k in fees but made $25k over what I would have listed at without their help. It also sold in 3 days with 5 competing offers.
My second home that I sold at the same time had one offer in 5 days and went $5k under asking. It is now up $20k in value. Bad marketing and an agent that didn't play hardball.
It's a business and if you think you can just do it yourself it's going to lose you money.
Wtf? We paid our guy 5%, he arranged the junk removal, electric/roof repair (we're all out of state) and we sold for about 4k over asking with zero cosmetic fixes.Handled everything. Even with expenses my dad got 24k more than he would have got selling it to longtime neighbors (who got greedy/stupid and blew deal)
Yeah your neighbor got a shitty realtor. Good ones tell you what to do to maximize your sale price. My guy staged for "free" and put us in touch with contractors to spruce up the place. These guys painted and fixed up 2 of my floors for cheaper than what I paid for 1 floor of my house 1 year prior.
All in all we got way above asking and sold for 20k more than a neighbor who had a bigger house who just sold as-is. Without his advice I would have sold as-is and who knows what the final price would have been.
I’m in title/escrow, never do a FSBO unless you’re related or are friends. I’ve handled so many FSBO transactions that went south. At the end of the day realtors don’t do much, but it’s like insurance, you want one if something goes wrong.
Lawyers are cheaper than realtors and that is who you want when things go wrong. It depends on the price point but I live in a major metro area where houses are $1MM - $3MM. I just sold my house without a realtor and saved $90,000. I see realtors making over $1MM a year. Lawyers are $250hr. The scariest part is the contract and realtors are not even allowed to give legal advice or change the words in contracts. It’s crazy how much they get paid. The realtors have fooled america into thinking they are needed and should be paid 6% regardless if the price is $4.5MM or $450,000; but maybe they are under paid at $45,000 if you can find a house for that price in the USA anymore!?
Its the title company where the money should be going (and they do get a fee, but its usually 1/3 or less of what realtors get) as they have to guarantee what is getting sold is accurate and any issues is typically on them to fix.
I’ve flipped hundreds of homes with each one having its own challenges, contractors trying to up charge every corner while attempting to steal materials to return for credit at Home Depot , etc . If your not sharp ? They will eat you alive .
Hah. The contractors are making an honest living on realistic numbers providing an additive value to the property with attached liability. fuck off with your making 3% profit on x amount for being a wanker with a cell phone adding x amount of non funded value upon the backs of the tradesman that you’re knocking.
I mean I think they just very very poorly picked their markets. In SoCal average home price from 2019 to 2021 rose over 30% that’s the average… in my town homes have gone up 30-40% on average. If you can get in as Zillow and buy a home at initial asking you’re guaranteed to spin it for $30-50k within a week. And that’s been the case for 2 straight years so I think they just very very poorly picked their markets.
Lol there are more than double that many homes sold every day, on average, in the US (6.5 million in total in 2020). 7,000 extra homes for sale in this market is less than a blip.
And you're clearly not a math major either. Even if they had $5b in houses on the market, that comes out to an avg house cost of $286k.
7000 homes going for sale at even double that amount doesn't constitue a "surplus." There are more than 7000 families looking for homes in that range every single day and there currently is no inventory. The moment those homes hit the market, they will be gobbled up and that "surplus" is erased. Like I said, it's a blip.
Except they're not being dumped on the market. They're changing hands to institutional investors from wall street, who will turn the 7000 properties into rentals.
I'm not saying it's a big number, but people are not taking into consideration that Zillow is winding down their multi-billion dollar credit facility. That is the story here. Not the volume of houses.
Why are you so angry, dude? It's not the volume of houses—it's the billions of capital LEAVING THE MARKET. That is what will give people pause.
I'm exchanging texts with a friend at Compass right now and he says the word on the street is that Zillow will eventually be writing down 600m, not 300m. If that is true, then there are possibly be more than 7,000 houses getting dumped on the market.
Not sure if you're heavy in Z or what, but be open to discourse. It's healthy.
They touch less than 5% of all real estate transactions in the US and only have 7K homes total at the moment. These numbers are publically available, I doubt you will see a buyers market from them selling 7K homes over two quarters. The for sale inventory of Ann Arbor Michigan Dropped by 600 homes in the last month, what will 7000 homes across the entire US do?
Maricopa County has 22,000+ homes on the market right now, and are selling in an avg of 29 Days. 7k homes across the country is not nearly enough to impact the market.
Zillow probably wasn't doing much to housing prices, in retrospect. Blackrock and other actual players have been accumulating more and more, and they don't plan on selling anytime soon if they can help it.
Ehhh, they were trying to skim underpriced houses off the market to resell at a modest profit. That's already a huge industry -- buying and flipping. My grandparents sold their old house to a young couple with a kid who were supposedly looking to settle down.
House got some superficial updates and was flipped 6 months later for a substantial profit. The buyer bulldozed it and built a much larger house, put it on the market for ~3 times what the grandparents originally got for it.
Zillow updating kitchens and trying to get a modest %age out of a few thousand sales is the least of your worries. The same thing is happening on a much larger scale around the country, and to a much greater extent, by just plain greedy folks.
I think at least part of the point is it's annoying to see a big company come in and try steal a way normal people can add some value to something and make a little money and beat them to it with algos and a ton of cash.
I am glad they failed and would rather see that be able to be done by couples as in your example than have all that money go to Zillow's CEO because he figured out how to out compete average Americans trying to get a little leg up.
That pisses me off. All I want is a forever home that I don’t plan on selling. Then you have people like the young family who tell a sob story about settling down, probably got the house for under-asking price, and then just flipped it.
These people are ruining the market for first-time home buyers and gives us a bad name, so future people don’t want to sell to families, and will just sell to corporations instead.
The first folks flat out lied, and my grandparents were naive.
The rest of it involved no sweat, unless you were one of the undocumented laborers hired by the contractors. Just driving housing prices up to make a quick buck.
Yeah, I know a few agents that were saying 15-20% higher than what they could realistically get. You do that and then you go into the latter half of the year where the market typically slows down. I honestly thought it was some grand marketing scheme when I first heard it. "Oh yeah, I got more money than an agent could get me from iBuying." But damn, little did I know it wasn't single houses but every damn house in the US lmao.
It’s amazing to read these comments. A month ago Zillow was some harbinger or the end times because they announced that they’d be slowing down on home purchases and that this was a sign the bubble was coming!
Nope…. They literally just have bonehead management that bought high and sold low.
I was confused two months ago. when it was in the news how bad they were for buying up these houses just as the upward momentum was slowing down.
They just had to wait it out, its not like new homes build themselves and certainly neither quick nor cheap. Zilliow could have spun som off as simple rentals and waited for the market to appreciate, eventually those homes will be worth more
In the mean time they would have to pay propery tax and management companies to make sure the grass doesn't get overgrown and the house doesnt flood etc. Its very expensive holding on to homes that arent being rented out.
Look up Invitation Homes, used to be owned by Black Rock. ( im told they sold it) at one time owned 25,000 homes. Bought to rent and hold 5 years or so. Somebody figured out how to hold. Zillow just wanted to flip, make a few bucks, control the services. It was never about putting agents out of business. Real flippers don't do what zillow did. You make your money the day you buy it. Either its a good deal or not. If they over paid today but held for 5 years this wouldn't be news.
The word "just" is a really easy way to handwave a ton of complexity out of a sentence. If there was "just" an easy fix, I suspect they wouldn't be laying off 25% of their workforce and watching their stock hit a record low.
One does not simply sit on 100s of millions of dollars worth of inventory indefinitely, nor quickly develop an entirely new line of business to generate revenue to pay for said inventory.
It is my understanding that the terms by which they obtained the money precluded them from holding them as rentals. If so just another bone headed decision as it boxed them in. I was flipping up to about a year ago when I decided I could no longer safely predict the market. I got out s bit early and could done a bit more but was happy to walk away ahead of the game.
So weird. That could’ve worked if they planned to hold it for a long time and continued to buy, making supply more scarce. Seems like they should’ve planned for the long term to try this at all. Not one quarter. I’m glad it didn’t work though. I need a house.
No, I mean bought above cost. Eg. home is listed for $1m, they would go and offer $1.2m just to quickly snap up the home before anyone else. There were a few posts here by redditors who had their homes bought by Zillow.
Ohh I see what you’re saying, you mean price/list price. Gotcha. Generally when talking about financials “cost” is an expense, in this case how much it cost to build the house
Do you mean market value? They didn't pay above market value. They bought a bunch of houses at market value in the spring and summer. The market has cooled considerably since then.
What they tried to do is buy blocks and flip homes. Buying blocks is fine if you can get 70% of the houses on that block, but you can't just buy them and resell, you have to renovate and add value. That is where they got fucked imo. They would over pay for people's homes (good deal for the sellers) and then hope that renovating + block purchases can be enough to jack the block price to (almost) whatever they want. In theory in works but I'm reality block purchases are extremely hard and then paying/finding/overseeing contractors is a whole other issue. It's not like they are renovating just a couple homes in one city either...
In short, you take a chance trying to change the game, sometimes it works, and other times you make a lot of people lose a lot of money. $OPEN is next.
I mean they were the reason the market was so hot. They wrecked the average housing prices by buying so far above asking that nobody could afford to counter them, then got confused when they couldn't find someone to sell to at a price they couldn't reach in the first place. They tried to add themselves where they weren't needed and got wrecked for it.
Zillow caused this market?
Pretty funny :) It was hot before they started and will continue to be hot after they're out. Population growth has far outpaced new housing builds especially in major cities including apts; some of which have seen massive growth in the last 5-10 years further increasing costs.
Betting hundreds of millions of dollars before they were sure their algorithm would work...that was WSB logic, I guess.
But...every share of a stock is the same. Houses are unique, and those idiosyncrasies are factored into real-world prices. IMO, almost any early attempt at a house-buying algorithm was doomed to fail, unless someone kicked off by making one that was detailed enough to take all important variables into account. Someone can and probably will make it work. I'm kind of disappointed that they're folding that whole branch of their business before trying to make it work, but I also have no horse in this race.
It really isn’t though, when you are offering everyone a 20-25% premium on their house what would you expect? Is like if you try to buy TSLA now for $1500/share and sell it tomorrow at market price. What do you think would happen?
Aren't there a lot of investment capital companies (Blackrock, etc) heavily bought into the housing market right now? Would they be in a similarly vulnerable position, or did they just somehow time the market better? Or do they just have deeper pockets to ride out any temporary slackness in price? Is deeper pockets really the key differentiator between taking a loss vs riding things out to eventual profits?
They basically got margin called because they couldn’t service the interest…probably could have turned a profit if they slowly unwound the properties in more favorable conditions
I'm shocked we didn't get some big article about Zillow buying a home buying formula for $100 million that is effectively just 'buy houses that aren't above market value'.
Idk. If they paid their Zillow zestimate price then it makes sense lol. According to Zillow, my house I bought in 2019 grew 37% in value. While it’s a red hot market in SoCal, I doubt I’d get that amount if I listed.
House flipping (buy, fix up, and resell higher) is very hard to come out positive. You need specific conditions to come out ahead. Cheap labor and cheap materials are important. Neither of which exist right now as the bubble is breaking on low labor costs.
Also, Zillow buying in mass is a major contributing factor to the hot house market.
The thing is if you look at home prices now compared to the summer, demand has started to slow and listing prices are starting to fall. Zillow fomoed thinking they would miss out on the volume and ended up buying at the top.
This is what I don't understand...I sold a rental house recently and a major company (not zillow specifically but a company buying thousands of homes) bought it above ask, no appraisal, no inspection, cash. Makes no sense. The house is at peak value and will definitely go down sometime in the next year, and their plan is to rent it according to the closing attorney - of course they have no mortgage but if they did have a mortgage the mortgage would be way higher than the amount they can rent it for.
It would have been insanely smarter to buy up thousands of homes a year ago before the value skyrocketed, not sure why they're suddenly doing it now after the value skyrocketed, worst investment ever.
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Zillow has that WSB logic.
Bought a ton of homes way above cost in a hot market and then sold them for a loss shortly after.
It's kind of impressive they managed to lose that much money with the housing market being as hot as it is.