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> 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 wh

> 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 neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. I lived in Lake Tahoe for ten years before AirBnB was a thing and three out of four homes there were absentee owners that only used them a few weeks a year. It made it a very hard place for small businesses to stay afloat. Most visitors stayed at big hotels or paid huge premiums for ad hoc "cabin rentals" through local realtors. The most depressing part was Halloween - kids hiking up and down steep hills to mostly empty houses. :)

duck 5y ago
Are you saying AirBnB fixed all this? I don't see them renting much in late October nor passing out candy.
- pigscantfly 5y ago
  No, they're saying the problem existed before AirBnB.
pixl97 5y ago
>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. But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.
uncomputation 5y ago
> 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, as the article points out, the nature of this algorithmic buying is that the iBuyers will only - or at least predominantly - end up with the houses they overpaid for or got only a slightly good deal on because many sellers will be willing to take longer for a better deal. The end result is very thin margins or, as seen with Zillow, substantial losses as they hold a lot of lemons.
- not2b 5y ago
  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.
pge 5y ago
Zillow wasn't pursuing the strategy of a traditional iBuyer, which as you note is to lowball. Zillow thought they were providing a service of market-making and didn't consider the risks (I still don't see why it wasn't obvious to them...). If they offered some discount from the Zestimate, that would have been a lot smarter, but it would have undermined their goal of making a market, as well as undermining the very concept of the Zestimate (if Zillow says my house is worth X, why are they offering me 80% of X?). The alternative would be to appraise each house in person instead of basing the purchase price on the Zestimate, but that wouldn't scale.
- runeks 5y ago
  > if Zillow says my house is worth X, why are they offering me 80% of X? Because they want to make money. Which they can’t by buying for X and then selling for X.

duck 5y ago

Are you saying AirBnB fixed all this? I don't see them renting much in late October nor passing out candy.

pigscantfly 5y ago
No, they're saying the problem existed before AirBnB.

pixl97 5y ago

>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. But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.

uncomputation 5y ago

> 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, as the article points out, the nature of this algorithmic buying is that the iBuyers will only - or at least predominantly - end up with the houses they overpaid for or got only a slightly good deal on because many sellers will be willing to take longer for a better deal. The end result is very thin margins or, as seen with Zillow, substantial losses as they hold a lot of lemons.

not2b 5y ago
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.

pge 5y ago

Zillow wasn't pursuing the strategy of a traditional iBuyer, which as you note is to lowball. Zillow thought they were providing a service of market-making and didn't consider the risks (I still don't see why it wasn't obvious to them...). If they offered some discount from the Zestimate, that would have been a lot smarter, but it would have undermined their goal of making a market, as well as undermining the very concept of the Zestimate (if Zillow says my house is worth X, why are they offering me 80% of X?). The alternative would be to appraise each house in person instead of basing the purchase price on the Zestimate, but that wouldn't scale.

runeks 5y ago
> if Zillow says my house is worth X, why are they offering me 80% of X? Because they want to make money. Which they can’t by buying for X and then selling for X.