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I made the same point on twitter a few days ago. https://twitter.com/mattmcknight/status/1456096267768147971 https://twitter.com/mattmcknight/status/1456096267

I made the same point on twitter a few days ago. https://twitter.com/mattmcknight/status/1456096267768147971 https://twitter.com/mattmcknight/status/1456096267768147971 Even CarMax and Carvana with commodity products in the traditional lemon market have to work around this problem by adding an inspection to confirm the data- and they have a large spread between their buying price and their selling price.

ethbr0 5y ago
> large spread between their buying price and their selling price This is the market I was amazed Zillow didn't get into: the "WE BUY UR HOUSE 4 CASH" market. I'm guessing the volume is too low (few people sell their house for stupid low offers) and advertising costs are too high (those people probably aren't obsessively checking Zillow for their home's value every day). But still, it seems like easy money, that someone far less knowledgeable and talented than them is currently scooping up, that would better insulate them against market turns.
- JumpCrisscross 5y ago
  > the market I was amazed Zillow didn't get into: the "WE BUY UR HOUSE 4 CASH" market They could have bootstrapped by offering a product to those cash4home operations.
benjaminjackman 5y ago
And don't forget flipping a car is a lot faster and easier than flipping a house at much lower capital. This makes each cycle of trial and error a lot cheaper and a lot more frequent. Also there is something to be said for a market where the customer brings the product to your location for inspection, and whose product is considerable faster to inspect more rigorously than a house. Also the products within that market are much more uniform and share several unifying characteristic across even different makes and model so its easier to learn a good and accurate pricing function. That gives them a lot more cycles to improve their algorithms (both human and machine based). Plus when CarMax were starting out they likely did so with a bevy of folks already experienced and profitable at buying and selling used cars at a profit who had the systematic knowledge of how to do so in their heads. It then was simply a matter of building up customer goodwill by focusing on another metric customers cared about, taking a perhaps slight loss to avoid the risk of being considerably ripped off by a savvy local dealer and saving oneself the anxiety induced by high pressure sales tactics. Having said that I think Zillow could still be quite successful in this endeavor however from my experience they didn't deploy their trading algorithm in a prudent way, they massively over-traded an untested by the real world model, they trusted their paper trading (backtesting) way to much, and they didnt focus on the nuts and bolts of building a successful market making system: making actual money over and over at small size and ramping up size as your empirically demonstrated pnl grows. Also putting trading aside they didn't have to be a flipper, they would probably naturally be more fit as an exchange+ or intermediary that provides exchange type backing and reduces the friction in buyers finding sellers, taking on risk by only making an offer when they have a bona fide buyer for fixed or % fee, but glossing over all the hassle of two people who dont know each other making a large trade. Offering services like if you dont like the house you just bought through us we will help your sell it at a cost proportional to renting no questions asked.
- treis 5y ago
  Carmax and Carvana also provide a service. They bring a bunch of cars to one place that you can peruse and buy. That's a better experience than trying to connect with a bunch of randos on craigslist. Zillow hasn't gotten to the point where they provide that, but theoretically they could. You could drive around with a Zillow agent and see their 50 homes for sale a lot quicker than coordinating with 50 random sellers.

ethbr0 5y ago

> large spread between their buying price and their selling price This is the market I was amazed Zillow didn't get into: the "WE BUY UR HOUSE 4 CASH" market. I'm guessing the volume is too low (few people sell their house for stupid low offers) and advertising costs are too high (those people probably aren't obsessively checking Zillow for their home's value every day). But still, it seems like easy money, that someone far less knowledgeable and talented than them is currently scooping up, that would better insulate them against market turns.

JumpCrisscross 5y ago
> the market I was amazed Zillow didn't get into: the "WE BUY UR HOUSE 4 CASH" market They could have bootstrapped by offering a product to those cash4home operations.

benjaminjackman 5y ago

And don't forget flipping a car is a lot faster and easier than flipping a house at much lower capital. This makes each cycle of trial and error a lot cheaper and a lot more frequent. Also there is something to be said for a market where the customer brings the product to your location for inspection, and whose product is considerable faster to inspect more rigorously than a house. Also the products within that market are much more uniform and share several unifying characteristic across even different makes and model so its easier to learn a good and accurate pricing function. That gives them a lot more cycles to improve their algorithms (both human and machine based). Plus when CarMax were starting out they likely did so with a bevy of folks already experienced and profitable at buying and selling used cars at a profit who had the systematic knowledge of how to do so in their heads. It then was simply a matter of building up customer goodwill by focusing on another metric customers cared about, taking a perhaps slight loss to avoid the risk of being considerably ripped off by a savvy local dealer and saving oneself the anxiety induced by high pressure sales tactics. Having said that I think Zillow could still be quite successful in this endeavor however from my experience they didn't deploy their trading algorithm in a prudent way, they massively over-traded an untested by the real world model, they trusted their paper trading (backtesting) way to much, and they didnt focus on the nuts and bolts of building a successful market making system: making actual money over and over at small size and ramping up size as your empirically demonstrated pnl grows. Also putting trading aside they didn't have to be a flipper, they would probably naturally be more fit as an exchange+ or intermediary that provides exchange type backing and reduces the friction in buyers finding sellers, taking on risk by only making an offer when they have a bona fide buyer for fixed or % fee, but glossing over all the hassle of two people who dont know each other making a large trade. Offering services like if you dont like the house you just bought through us we will help your sell it at a cost proportional to renting no questions asked.

treis 5y ago
Carmax and Carvana also provide a service. They bring a bunch of cars to one place that you can peruse and buy. That's a better experience than trying to connect with a bunch of randos on craigslist. Zillow hasn't gotten to the point where they provide that, but theoretically they could. You could drive around with a Zillow agent and see their 50 homes for sale a lot quicker than coordinating with 50 random sellers.