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yeah where I live in AZ, Zillow overpaid massively for every home it purchased that I've seen. Like 15-20% over usual price. And they've priced the homes they

yeah where I live in AZ, Zillow overpaid massively for every home it purchased that I've seen. Like 15-20% over usual price. And they've priced the homes they are selling quite a bit below what they bought them for already. Many aren't moving too. I'm not too sure why they just don't hold onto the homes though. Even with the carrying costs, holding on would be profitable if market is to rise another 10%+ as some are predicting. The only reasonable explanation to me is that they are expecting a significant drop in 2022-2023, but maybe I'm wrong.

thehappypm 5y ago
Carrying costs aren’t $0 though and it would be horrible PR to sit on empty houses when people are struggling to find affordable housing.
nostrademons 5y ago
They can't do it without getting creamed by the market (which is exactly what's happening now). They're a public company, which means they need to report earnings quarterly. All of those carrying costs come straight out of earnings. Worse, they're a public tech company, which are usually valued on having consistently increasing revenues and high margins (Zillow had something like 80% margins before Zillow Offers). If they have a year of massive losses investors are going to lose confidence in their business model, tank the stock, and oust the CEO. I suspect that Blackrock or whoever buys the portfolio is going to make massive amounts of money off of it, though. Financial firms are setup to hold assets for long periods of time and even out gains and losses, and their investors expect this.
- jrochkind1 5y ago
  Especially because whoever buys their portfolio is going to get Zillow selling it at a loss, they're going to pay less than zillow did!
- croutonwagon 5y ago
  There’s also the reality that unoccupied homes rot from the inside out. It turns a traditionally appreciative asset quickly into a depreciating asset that, when looking at Zillow, also creates a bit of a market trend since comps are also common in pricing a house. Banks had this same issue with the foreclosure issues following 2008. And it was largely why some just….didn’t forclose or in other cases struck deals to allow the previous owner to stay on temp basis.
onlyrealcuzzo 5y ago
It's hard to say how much they were overpaying. If they "overpayed" by 20% - almost certainly someone else was willing to "overpay" by at least 10% if not 15%. Unless it's a pretty strong buyers market (spoiler: 2020-now wasn't) - you're gonna have a tough time buying a lot of houses and not "overpaying".
- kilbuz 5y ago
  Exactly this. We got a house in hot market last Spring at 17% over asking. Did we overpay? Almost certainly. Did we lose out on 5 bids prior by "only" overbidding 5-15%? Yes. In a sea of exuberant buyers, you have to be the most exuberant. Not a great feeling at the time, but we plan on this being a keeper, and the timing was right for us.
- refurb 5y ago
  There were a few Reddit threads on people who sold to Zillow. They certainly overpaid. We’re talking listing for $450k, get real human offers of $485k, asking Zillow for offer and getting $510k.

thehappypm 5y ago

Carrying costs aren’t $0 though and it would be horrible PR to sit on empty houses when people are struggling to find affordable housing.

nostrademons 5y ago

They can't do it without getting creamed by the market (which is exactly what's happening now). They're a public company, which means they need to report earnings quarterly. All of those carrying costs come straight out of earnings. Worse, they're a public tech company, which are usually valued on having consistently increasing revenues and high margins (Zillow had something like 80% margins before Zillow Offers). If they have a year of massive losses investors are going to lose confidence in their business model, tank the stock, and oust the CEO. I suspect that Blackrock or whoever buys the portfolio is going to make massive amounts of money off of it, though. Financial firms are setup to hold assets for long periods of time and even out gains and losses, and their investors expect this.

jrochkind1 5y ago
Especially because whoever buys their portfolio is going to get Zillow selling it at a loss, they're going to pay less than zillow did!
croutonwagon 5y ago
There’s also the reality that unoccupied homes rot from the inside out. It turns a traditionally appreciative asset quickly into a depreciating asset that, when looking at Zillow, also creates a bit of a market trend since comps are also common in pricing a house. Banks had this same issue with the foreclosure issues following 2008. And it was largely why some just….didn’t forclose or in other cases struck deals to allow the previous owner to stay on temp basis.

onlyrealcuzzo 5y ago

It's hard to say how much they were overpaying. If they "overpayed" by 20% - almost certainly someone else was willing to "overpay" by at least 10% if not 15%. Unless it's a pretty strong buyers market (spoiler: 2020-now wasn't) - you're gonna have a tough time buying a lot of houses and not "overpaying".

kilbuz 5y ago
Exactly this. We got a house in hot market last Spring at 17% over asking. Did we overpay? Almost certainly. Did we lose out on 5 bids prior by "only" overbidding 5-15%? Yes. In a sea of exuberant buyers, you have to be the most exuberant. Not a great feeling at the time, but we plan on this being a keeper, and the timing was right for us.
refurb 5y ago
There were a few Reddit threads on people who sold to Zillow. They certainly overpaid. We’re talking listing for $450k, get real human offers of $485k, asking Zillow for offer and getting $510k.