4 ms·

'Price-Distorting' iBuyers Like Zillow Hurt U.S. Homeowners, Rivals Say

13 points by elsewhen 5y ago

randomopining 5y ago
Prices going to go down by mid/late next year? Figure they must be building a ton of new houses, supply will catch up.
wil421 5y ago
2.5 years ago when I night my home Zillow and Open Door both bought homes near where I bought. They both sat for over 6 months until they sold. Both were very odd homes compared to ones around them. They also offered below market rate.
bko 5y ago
> The criticism of iBuyers is not limited to internet users. Competitors and local real estate agents are starting to voice their concerns with the model and say they know of a better way. If real estate agents don't like this, then I'm a fan. The real estate market is basically a cartel of entrenched interests. In my experience, most of the research done before buying a home has been done by the individual. 6% commission made sense when the broker would drive you around and help you shop neighborhoods and inform you. Today when you see a home you're more likely to know more than the broker because you may be looking at a handful of homes while he may represent dozens or more. Renting is even crazier. I know people that paid 1.5 - 2 months commission on a rental in NYC (2-4k per month) for a one year lease. The agent spent all of 15 minutes with the client and would even arrange multiple people to view the apartment at once. The fact that commissions have not come down even as home prices have gone up over the decades tells you a lot.
- dehrmann 5y ago
  I recently saw a stackexchange post on if a buyer's interests are aligned with the agent's, and the short answer is "no." The most obvious example is there isn't even an incentive to get buyers the best price.
  - gruez 5y ago
    more on this: https://www.youtube.com/watch?v=aFYlgqv3T-w https://www.youtube.com/watch?v=aFYlgqv3T-w tl;dw: if you wait longer for a better offer and you get a $10k price increase, the realtor might only get $150. That absolutely pales in comparison to how much the real estate agent can get if he sold another house.
- conception 5y ago
  You can hate this and hate real estate agents. Supporting Zillow’s attempts to artificially inflate home prices also isn’t great. Or corporate America’s current fascination with purchasing single family homes. Both are bad. Don’t be a fan of terrible things just because someone you also don’t like is against it.
  - bko 5y ago
    If Zillow wants to make me an offer for my home, sight unseen, I don't see how that's a bad thing. I can always refuse. As a buyer I guess they're competing with me but they're likely to move quicker on selling the home. I've been screwed over when buying a home where the selling broker is dishonest and gives preferential treatment to his clients since he earns double commission if he's both buying and selling agent. Not to mention the bizarre practice of blind bidding. I made 6 offers on homes, all at ask price only to be told others bid and I have a few days to up my offer. By how much? Anyone's guess...
    - adamredwoods 5y ago
      Ouch, yes I think it is odd to have a broker manage both seller and buyer. As for blind bidding, this is where our realtor did a great job, by inquiring with the selling realtor to find out where bids were and finding comparable houses recently sold. Also, on one house we bid low on, our realtor was able to convince the seller to come back with a counter offer.
- jiveturkey 5y ago
  > Today when you see a home you're more likely to know more than the broker I don't think that's true. - First time buyers. As a first time buyer, you are likely to know very little about the process, as well as what to look for. Red flags and such. You'll have seen the photos and read the MLS facts. This is just trivial info. - Local conditions. If you're not buying in a neighborhood where you already live, you need local expertise. - Inspection. For states where the seller shows you an inspection report, you want someone who has seen it all, to read between the lines for you. - Pre-filtering. Brokers get to go on broker tours, before the house hits the market (if it hits the market!). So the good local agents will already be familiar with the property when it hits MLS. This can be a valuable time-saver. That said, most agents are noobs and provide none of that value. They are worthless. The experienced and good ones are worth every penny. I've done about a dozen real estate transactions, incl. 1 commercial transaction. I know almost all of the things by now. I still use an agent. I think the real problem is that there is no certification process. I mean, there hardly could be. A real estate license is garbage, easily obtained. Agents get into the field very easily, and new buyers have no idea how to assess their agent. At least for licensed trades, their is the local board and Yelp. We need such a thing for agents as well, because they do provide value, if you have a good one. This is really coming to a head now, with the super tight market. In this market, the value of an agent seems low to most, because as seller you think you'll get premium price regardless, and as buyer you think you need to make a top offer, again, regardless. That said, it is definitely a cartel and needs to change.
- djanogo 5y ago
  Don't forget the title insurance scam which takes out ~0.75% as closing fees. Look up their pay out rates and that industry's lobbying. Same few companies make 0.75% insuring new customer from previous customer every time the same house gets sold.
  - bko 5y ago
    Yes! Thanks for bringing this up. There's also a state minimum for title insurance. In my state its set by "New Jersey Department of Banking and Insurance". Thank God for state regulators protecting us little guys from paying too little for title insurance.
gruez 5y ago
>“These are price-distorting entities,” Vishal Garg, the founder and CEO of Better.com, a digital homeownership company, told Motherboard. “They harm our customers.” I skimmed the rest of the article and I'm not sure how it distorts price. The only thing that's actually substantiated is the spread that ibuyers have (eg. buying a house at $895k and selling at $905k), which is more "markup" than price distortion. Supermarkets have markups as well, but I wouldn't characterize them as "distorting price". Further down there's mention of some sort of conspiracy to corner the housing market or something. >Such a model costs too much, Garg said. “I don’t like it because it means that consumers are going to lose money,” Of course they're going to lose money, compared to if they waited and found the perfect buyer. But in exchange they get liquidity. On the flip side, there's also costs to not having liquidity, eg. the market moving against you, or having to wait months for a sale. >Garg compared the iBuyer model to ticket scalping, noting that iBuyers tend to be most active in hot markets like Phoenix and Raleigh. ticket scalping happens because bands sell tickets for less than it's worth, usually to whoever shows up first. the scalper's role is therefore as an arbitrageur, buying something that's mispriced and selling it for market price. Is there any evidence that's the case for zillow? Are they beating everyone to the houses that are mispriced?
- unethical_ban 5y ago
  >ticket scalping happens because bands sell tickets for less than it's worth, usually to whoever shows up first. the scalper's role is therefore as an arbitrageur, buying something that's mispriced and selling it for market price. Is there any evidence that's the case for zillow? Are they beating everyone to the houses that are mispriced? Ah, you think the outcome of a fully "free" market is the best of all possible worlds. The band wants tickets to be affordable for their fans. Scalpers monopolize the market by using their purchasing power to eat up supply, and resale for their own benefit to those who can afford it - wishes of the bands be damned. The comparison being made, which I'm not sure is true or not, is that Zillow is doing something similar. They are using massive amounts of buying power to consolidate supply of a market, dominating it to the detriment of people with more modest means, that would have been able to afford a home otherwise. edit to add: Yes, they are providing liquidity for sellers, but is that "market efficiency" best for society? Zillow sure isn't providing their service for the greater good.
dragonwriter 5y ago
> “These are price-distorting entities,” Vishal Garg, the founder and CEO of Better.com, a digital homeownership company, told Motherboard. “They harm our customers.” WTF kind of marketing BS is a “digital homeownership conpany”? Better.com is a mortgage lender.

13 points by elsewhen 5y ago

Prices going to go down by mid/late next year? Figure they must be building a ton of new houses, supply will catch up.

2.5 years ago when I night my home Zillow and Open Door both bought homes near where I bought. They both sat for over 6 months until they sold. Both were very odd homes compared to ones around them. They also offered below market rate.

bko 5y ago

> The criticism of iBuyers is not limited to internet users. Competitors and local real estate agents are starting to voice their concerns with the model and say they know of a better way. If real estate agents don't like this, then I'm a fan. The real estate market is basically a cartel of entrenched interests. In my experience, most of the research done before buying a home has been done by the individual. 6% commission made sense when the broker would drive you around and help you shop neighborhoods and inform you. Today when you see a home you're more likely to know more than the broker because you may be looking at a handful of homes while he may represent dozens or more. Renting is even crazier. I know people that paid 1.5 - 2 months commission on a rental in NYC (2-4k per month) for a one year lease. The agent spent all of 15 minutes with the client and would even arrange multiple people to view the apartment at once. The fact that commissions have not come down even as home prices have gone up over the decades tells you a lot.

dehrmann 5y ago
I recently saw a stackexchange post on if a buyer's interests are aligned with the agent's, and the short answer is "no." The most obvious example is there isn't even an incentive to get buyers the best price.
- gruez 5y ago
  more on this: https://www.youtube.com/watch?v=aFYlgqv3T-w https://www.youtube.com/watch?v=aFYlgqv3T-w tl;dw: if you wait longer for a better offer and you get a $10k price increase, the realtor might only get $150. That absolutely pales in comparison to how much the real estate agent can get if he sold another house.
conception 5y ago
You can hate this and hate real estate agents. Supporting Zillow’s attempts to artificially inflate home prices also isn’t great. Or corporate America’s current fascination with purchasing single family homes. Both are bad. Don’t be a fan of terrible things just because someone you also don’t like is against it.
- bko 5y ago
  If Zillow wants to make me an offer for my home, sight unseen, I don't see how that's a bad thing. I can always refuse. As a buyer I guess they're competing with me but they're likely to move quicker on selling the home. I've been screwed over when buying a home where the selling broker is dishonest and gives preferential treatment to his clients since he earns double commission if he's both buying and selling agent. Not to mention the bizarre practice of blind bidding. I made 6 offers on homes, all at ask price only to be told others bid and I have a few days to up my offer. By how much? Anyone's guess...
  - adamredwoods 5y ago
    Ouch, yes I think it is odd to have a broker manage both seller and buyer. As for blind bidding, this is where our realtor did a great job, by inquiring with the selling realtor to find out where bids were and finding comparable houses recently sold. Also, on one house we bid low on, our realtor was able to convince the seller to come back with a counter offer.
jiveturkey 5y ago
> Today when you see a home you're more likely to know more than the broker I don't think that's true. - First time buyers. As a first time buyer, you are likely to know very little about the process, as well as what to look for. Red flags and such. You'll have seen the photos and read the MLS facts. This is just trivial info. - Local conditions. If you're not buying in a neighborhood where you already live, you need local expertise. - Inspection. For states where the seller shows you an inspection report, you want someone who has seen it all, to read between the lines for you. - Pre-filtering. Brokers get to go on broker tours, before the house hits the market (if it hits the market!). So the good local agents will already be familiar with the property when it hits MLS. This can be a valuable time-saver. That said, most agents are noobs and provide none of that value. They are worthless. The experienced and good ones are worth every penny. I've done about a dozen real estate transactions, incl. 1 commercial transaction. I know almost all of the things by now. I still use an agent. I think the real problem is that there is no certification process. I mean, there hardly could be. A real estate license is garbage, easily obtained. Agents get into the field very easily, and new buyers have no idea how to assess their agent. At least for licensed trades, their is the local board and Yelp. We need such a thing for agents as well, because they do provide value, if you have a good one. This is really coming to a head now, with the super tight market. In this market, the value of an agent seems low to most, because as seller you think you'll get premium price regardless, and as buyer you think you need to make a top offer, again, regardless. That said, it is definitely a cartel and needs to change.
djanogo 5y ago
Don't forget the title insurance scam which takes out ~0.75% as closing fees. Look up their pay out rates and that industry's lobbying. Same few companies make 0.75% insuring new customer from previous customer every time the same house gets sold.
- bko 5y ago
  Yes! Thanks for bringing this up. There's also a state minimum for title insurance. In my state its set by "New Jersey Department of Banking and Insurance". Thank God for state regulators protecting us little guys from paying too little for title insurance.

gruez 5y ago

>“These are price-distorting entities,” Vishal Garg, the founder and CEO of Better.com, a digital homeownership company, told Motherboard. “They harm our customers.” I skimmed the rest of the article and I'm not sure how it distorts price. The only thing that's actually substantiated is the spread that ibuyers have (eg. buying a house at $895k and selling at $905k), which is more "markup" than price distortion. Supermarkets have markups as well, but I wouldn't characterize them as "distorting price". Further down there's mention of some sort of conspiracy to corner the housing market or something. >Such a model costs too much, Garg said. “I don’t like it because it means that consumers are going to lose money,” Of course they're going to lose money, compared to if they waited and found the perfect buyer. But in exchange they get liquidity. On the flip side, there's also costs to not having liquidity, eg. the market moving against you, or having to wait months for a sale. >Garg compared the iBuyer model to ticket scalping, noting that iBuyers tend to be most active in hot markets like Phoenix and Raleigh. ticket scalping happens because bands sell tickets for less than it's worth, usually to whoever shows up first. the scalper's role is therefore as an arbitrageur, buying something that's mispriced and selling it for market price. Is there any evidence that's the case for zillow? Are they beating everyone to the houses that are mispriced?

unethical_ban 5y ago
>ticket scalping happens because bands sell tickets for less than it's worth, usually to whoever shows up first. the scalper's role is therefore as an arbitrageur, buying something that's mispriced and selling it for market price. Is there any evidence that's the case for zillow? Are they beating everyone to the houses that are mispriced? Ah, you think the outcome of a fully "free" market is the best of all possible worlds. The band wants tickets to be affordable for their fans. Scalpers monopolize the market by using their purchasing power to eat up supply, and resale for their own benefit to those who can afford it - wishes of the bands be damned. The comparison being made, which I'm not sure is true or not, is that Zillow is doing something similar. They are using massive amounts of buying power to consolidate supply of a market, dominating it to the detriment of people with more modest means, that would have been able to afford a home otherwise. edit to add: Yes, they are providing liquidity for sellers, but is that "market efficiency" best for society? Zillow sure isn't providing their service for the greater good.

dragonwriter 5y ago

> “These are price-distorting entities,” Vishal Garg, the founder and CEO of Better.com, a digital homeownership company, told Motherboard. “They harm our customers.” WTF kind of marketing BS is a “digital homeownership conpany”? Better.com is a mortgage lender.