Zillow bought a house in a neighborhood where I'm active

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Submitted by Escoguy on August 2, 2021 - 8:16pm

So maybe many of you have seen this already so it may not mean as much but for the first time, I'm seeing a house listed which is "owned by Zillow".

My thoughts:

They have a lot of data, cheap capital, and this won't be a one time thing.
One could argue, this puts a kind of floor under the market in the intermediate term as a player like this with deep pockets could arguably buy a meaningful portion of inventory in a market like SD and almost work like a cartel leader.

Part of me thinks anyone who has been holding out of buying will resent this trend.

Personally, I would rather see long term investors/actual owners buy the property.

It may also provide liquidity in some cases but I don't think they would offer top dollar etc.

Here is the home as an FYI:
https://www.zillow.com/homedetails/3167-...

As of 21 hours on the market, it has 29 saves and 681 views.
Typically for every save, the house will sell for $1K over list.
I'm guessing this will end up at 910-930K.

Submitted by Escoguy on August 2, 2021 - 8:17pm.

I do want the HOA to contact them though as they let the lawn go to hell.

Submitted by gzz on August 3, 2021 - 10:48am.

The photos made me dizzy. Why is the front door tiny and open to a long thin corridor?

Submitted by XBoxBoy on August 5, 2021 - 1:03pm.

I notice that this home is now pending. I wonder how much zillow will make off this transaction?

Submitted by gzz on August 5, 2021 - 3:32pm.

For Z and other tech stocks, its not about the money, but the friends you make along the way.

Submitted by Escoguy on August 6, 2021 - 1:24pm.

XBoxBoy wrote:
I notice that this home is now pending. I wonder how much zillow will make off this transaction?

My guess is about 50K for owing it one month.

Pending after 4 days.

Just one more indication, there is a structural gap (lack of supply).

I expect they will do this as often as they can.

Margin may drop over time but expect they will target 20-30K min per transaction.

Submitted by sdrealtor on August 6, 2021 - 1:55pm.

Brother of a friend sold his place to Zillow a couple years ago. They ended up holding it for a while and ultimately lost money. They have virtually no cost of capital. I believe they are more concerned with figuring out this as a business model than making money for now. Billion dollar companies lose money on things all the time. This is one of those for them in many cases. They need to be among the companies trying this as a hedge to protect their primary business

Submitted by ucodegen on August 8, 2021 - 2:05am.

gzz wrote:
The photos made me dizzy. Why is the front door tiny and open to a long thin corridor?

Those are normal corridors (fire/building code mandates it). I have noticed that realtors are really pushing the rectilinear wide angle lens boundaries to the 'max'. This distorts the center field making it look deeper but the side effect is objects in front might also look narrower/smaller.

In other words, the use of the wide angle made the hallway look longer than it really is, but also makes it look narrower. Those floorboard are probably around 8" wide, I count 7 (almost 8) across at the narrowest. That makes the opening at the narrow portion 56" to 64". If the boards are 6", the opening is 42" to 48"(which would be a little narrow - but not as narrows as one's impression looking at the photo). The door is 6.5 boards wide; at 8" makes doorway 52", 6" wide boards make it 39"(min entry door size by code is 36"). The cropping also doesn't help.. opening up the photo to full size looks better.

From the outside, the photo of the front door is odd - it is offset from the arch in front of it. (feng shui? to prevent evil energy from entering?? dunno)

That semi room at the side (dining room?) with the chandelier is a little odd. You can see how from one view, it looks really long and narrow, but the photo that is about 30 degrees oblique, it does not look so deep.

On the outside(back yard) on edge photos, you can see how the building looks like it might be 50 to 70 feet on the edge.. but may actually be about 30 (see straight on photo).

The down the edge photo of the kitchen (2nd photo) really shows it.. and you see that the far wall looks like it is over in their neighbors back yard..

I have a 12-24mm lens that creates this type of effect. Good for some landscape, but you have to be careful of side effects for interior.

BTW: the 3D home views are even more distorted..

Submitted by sdrealtor on August 8, 2021 - 2:10pm.

Zillow just bought this one in MM for $787,500. That is full retail on it. It may even be a touch high for this one in that condition. They put it back on at a price that is no better than breakeven if they get that price.

https://www.zillow.com/homes/10842-White...

Submitted by Escoguy on October 18, 2021 - 8:35pm.

Now that Zillow is pausing, they have at least a dozen or so in North County, haven't done a formal tally.

The "explanation" is they can't find enough people to prep the houses for sale etc.

Will be notable to see how the buy and flip goes at that level.

Not really convinced the model works, most landlords rely on cashflow and owners get place to live, Zillow only gains if the momentum keeps up which today may be 50/50 on a month to month basis.

Kind of a shame, they get in skew the data some and come up with a lame excuse to pause.

Given the corporate overheads, the need to bring in margins of 3-5K per month to breakeven. Individuals don't need that kind of short term gain to cover a payroll. So in a sense this business model is borderline ridiculous. But what do I really know?

Submitted by sdrealtor on October 18, 2021 - 9:48pm.

Youre correct. They seem to have been overpaying. As long as values are skyrocketing it was ok. Once things slowed they were likely losing money. I think they may have learned a lesson. It's not easy and success flipping comes in the trenches

Submitted by gzz on October 19, 2021 - 2:04pm.

Wow, MM is quite cheap for how central it is. I hate driving on MM Blvd however, seems rush hour there starts at 2:30 and goes to 7 and people drive aggressively and poorly on it, like LA though not that bad.

Submitted by svelte on October 21, 2021 - 9:09am.

sdrealtor wrote:
Zillow just bought this one in MM for $787,500. That is full retail on it. It may even be a touch high for this one in that condition. They put it back on at a price that is no better than breakeven if they get that price.

https://www.zillow.com/homes/10842-Whitehall-Rd-San-Diego,-CA-92126_rb/16788569_zpid/

$800K for that crackerbox. What planet am I on?

Submitted by an on October 21, 2021 - 9:33am.

svelte wrote:
sdrealtor wrote:
Zillow just bought this one in MM for $787,500. That is full retail on it. It may even be a touch high for this one in that condition. They put it back on at a price that is no better than breakeven if they get that price.

https://www.zillow.com/homes/10842-Whitehall-Rd-San-Diego,-CA-92126_rb/16788569_zpid/

$800K for that crackerbox. What planet am I on?


California planet

Submitted by treehugger on October 23, 2021 - 8:11am.

For fun I filled out the form to see if Zillow would buy my rental condo, we looked at comps and thought maybe $560,000 and Zillow came back and offered me $578,000, they have high fees (7.5%) but I still would have walked with what I expected....They also offered to assist with our 1031 exchange....the house we were going to flip into ended up in a bidding war and went for way over ask so we ultimately decided to keep condo.

Submitted by Escoguy on October 23, 2021 - 11:00am.

If Zillow could conceivably have enough inventory for both sides of the transaction, that would be a real win/win. I.e. not just buy but also have an upgrade/downgrade new investment property.

Me thinks they would need thousands of properties to make that happen but they could go through a prearrangement process. i.e. if we find something, then you could sell and buy.

In Russia, years ago property transactions could take months, as the buyer would usually need to find a buyer for his place etc, I heard of buyer chains of upwards of 5-7 transactions involved.

Submitted by svelte on October 24, 2021 - 1:19pm.

Escoguy wrote:

In Russia, years ago property transactions could take months, as the buyer would usually need to find a buyer for his place etc, I heard of buyer chains of upwards of 5-7 transactions involved.

Isn't that just a contingency as is also common in the US? I've heard of those getting stacked up pretty deep also.

Submitted by Escoguy on October 29, 2021 - 7:26pm.

sdrealtor wrote:
Zillow just bought this one in MM for $787,500. That is full retail on it. It may even be a touch high for this one in that condition. They put it back on at a price that is no better than breakeven if they get that price.

https://www.zillow.com/homes/10842-Whitehall-Rd-San-Diego,-CA-92126_rb/16788569_zpid/

So looks like flipping in a hot market isn't so easy if one isn't nimble:

https://www.bloomberg.com/news/articles/...

Part of me wants them to succeed but not sure this is the model.
In fact, I'm fairly certain Zillow flipping is not the way to go.

Submitted by carlsbadworker on November 1, 2021 - 10:59am.

Shares of Zillow Group Inc. took a dive Monday, after KeyBanc analyst Edward Yruma highlighted how most of the homes the real estate services company purchased, with an aim to flip them, were now worth less than what they paid for them.

The stock Z, -5.26% shed 5.8% in midday trading. Although the stock was still up 13.6% since closing at a 13-month low of $86.00 on Oct. 18, which was the day Zillow said it would stop buying U.S. homes after building a big backlog, the stock was still down 51.1% since closing at a record $199.90 on Feb. 16.

“Zillow may have leaned into home acquisition at the wrong time, and we believe earnings may be at risk due to its current home inventory ($1.17 billion at 2Q21),” Yruma wrote in a note to clients.

Yruma said it completed an analysis of 650 homes in Zillow’s inventory, or about one-fifth of the homes owned, and found that 66% are currently listed below the purchase price at an average discount of 4.5%.

Of the 650 homes Yruma analyzed, the cities in which the company had the highest percentage of homes that were listed below the purchase price were San Diego at 94.3%, Phoenix at 93.4% and Mesa, Ariz. at 92.6%.

The city with the most homes listed below the purchase price was Phoenix with 71. Charlotte, N.C. had 70 and Las Vegas had 52.

“While we do think that [Zillow’s] issues are likely transitory in nature, we do think it highlights the importance of strong property level and market data,” Yruma wrote. “From a [long-term] perspective, we maintain that [Zillow’s] changing customer focus (the agent is the customer in the IMT business vs. the consumer in homes) may for unanticipated (and likely negative) compromises.”

Yruma reiterated the neutral rating he’s had on the stock since February 2020.

The stock has tumbled 24.8% year to date, while Zillow’s Class A shares ZG, -7.11%, which were shedding 7.6% on Monday, have sunk 28.2% this year. In comparison, the iShares U.S. Home Construction exchange-traded fund ITB, 1.00% has run up 30.3% and the S&P 500 index SPX, -0.09% has gained 22.8%.

Submitted by sdrealtor on November 1, 2021 - 7:47pm.

sdrealtor wrote:
Zillow just bought this one in MM for $787,500. That is full retail on it. It may even be a touch high for this one in that condition. They put it back on at a price that is no better than breakeven if they get that price.

https://www.zillow.com/homes/10842-Whitehall-Rd-San-Diego,-CA-92126_rb/16788569_zpid/

Funny I noticed this about a month before this post in early August. Ten days later they paused. Now two months later what I wrote about is out in public. The prices they were paying here just didn't make sense back then

Submitted by sdrealtor on November 2, 2021 - 1:37pm.

Was gonna post this morning that the layoffs would come soon but they came much harder and faster than I would've thought. Really surprised they are cutting that deep. 25% on the way out the door

Submitted by carlsbadworker on November 2, 2021 - 2:30pm.

sdrealtor wrote:
Was gonna post this morning that the layoffs would come soon but they came much harder and faster than I would've thought. Really surprised they are cutting that deep. 25% on the way out the door

Bloomberg reported Monday that Zillow is looking to sell about 7,000 homes, and is seeking roughly $2.8 billion for the houses. Will we see any of those in the market?

Submitted by carlsbadworker on November 2, 2021 - 2:53pm.

sdrealtor wrote:
The prices they were paying here just didn't make sense back then

Sean Gotcher, a Las Vegas real estate agent, offered a conspiracy theory that iBuyer companies are manipulating the market by intentionally overpaying for some homes in order to sell others that they’ve already bought in nearby areas for a higher price.

Submitted by XBoxBoy on November 2, 2021 - 3:33pm.

carlsbadworker wrote:
Sean Gotcher, a Las Vegas real estate agent, offered a conspiracy theory that iBuyer companies are manipulating the market by intentionally overpaying for some homes in order to sell others that they’ve already bought in nearby areas for a higher price.

As always, I would stay away from conspiracy theories. Zillow is losing money on the houses they've bought and are now trying to sell. Simple foolishness on the part of a large company is all there is to see here.

Here's an example of their efforts, bought for 790k, now listed for sale at 741k
https://www.zillow.com/homedetails/1538-...

Personally, I'm glad to see them exit the market and I hope other big companies learn from their mistakes. Buying and selling homes at a profit isn't as easy as it sounds on those reality shows.

Submitted by sdrealtor on November 2, 2021 - 3:51pm.

carlsbadworker wrote:
sdrealtor wrote:
Was gonna post this morning that the layoffs would come soon but they came much harder and faster than I would've thought. Really surprised they are cutting that deep. 25% on the way out the door

Bloomberg reported Monday that Zillow is looking to sell about 7,000 homes, and is seeking roughly $2.8 billion for the houses. Will we see any of those in the market?

Many of them already are and others will be. The own a couple hundred here. It wont have any impact on the market. They will sell at market value. Zillow paid too much and will lose money.

I noticed this a few months ago whn I saw experienced realtors selling their homes to Zillow. Those realotrs can sell their homes themselves and at most pay a buyers agent commission. They know what their homes are worth. Zillow was charging 5 to 7% fees in the prices prices paid. That means they were paying well over what the agents could themselves on the open market by around 5%. Zillow was also buying homes as-is and paying fixed up retail prices. It made no sense to me but I didnt know enough about it to really call them out here until I knew more. In early August it was getting obvious they were paying too much and thats when I first posted something.

Its not that I have a crystal ball, its just that I know agents wouldnt sell them to zillow unless they were making out better than selling themselves on open market even after paying zillow hefty fees

Submitted by sdrealtor on November 2, 2021 - 3:53pm.

XBoxBoy wrote:
carlsbadworker wrote:
Sean Gotcher, a Las Vegas real estate agent, offered a conspiracy theory that iBuyer companies are manipulating the market by intentionally overpaying for some homes in order to sell others that they’ve already bought in nearby areas for a higher price.

As always, I would stay away from conspiracy theories. Zillow is losing money on the houses they've bought and are now trying to sell. Simple foolishness on the part of a large company is all there is to see here.

Here's an example of their efforts, bought for 790k, now listed for sale at 741k
https://www.zillow.com/homedetails/1538-...

Personally, I'm glad to see them exit the market and I hope other big companies learn from their mistakes. Buying and selling homes at a profit isn't as easy as it sounds on those reality shows.

I agree and dont see a conspiracy. I think they figured the market would go up a little, they had free wall street money and they wanted to see if they could play this game and win. I think they were hoping to breakeven and figure out a new business model but got burned because the local real estate markets are much more efficient than anyone gives them credit for

Submitted by gzz on November 2, 2021 - 4:31pm.

Zillow was overpaying for homes, but also charging the seller a 7% "fee" that it kept itself?

The seller in such circumstance would demand an extra 4.5% as the difference between Zillow's fee and the normal buyer agent fee.

This inflates what Zillow actually paid and makes its losses also look larger.

We shouldn't be too shocked Z is losing a lot of money. That's the Silicon Valley DISRUPTION! that investors are lining up to subsidize.

Lyft just reported Q3 2021 results, and revenue is still well below Q3 2019. They also have diluted shareholders by 10% by issuing more shares, have dissipated another 1.5 billion from their balance sheet, and lost "only" $60 million because they booked a 1-time $125 million gain on selling their self driving assets to Toyota.

Despite another quarter of massive losses, they are up 12% afterhours and higher than 2019 when the company had more revenue and more customers.

Submitted by sdrealtor on November 2, 2021 - 6:33pm.

Zillow charges 5-7%. Sellers typically pay 5% and have other fees like pre sale fixes, staging, termite and repairs they don't with Zillow. So call the prices Z pays basically the same net if price is the same. But Z was paying 3-5% above. Seller was getting above market net with no work or uncertainty. It was a gift to sellers while it lasted. That's why agents were selling they're homes to Z

Stocks are valued on future expectations not past performance. C'mon man! You know that

Zillow ibuying has no future expectations anymore. Done

Submitted by sdrealtor on November 3, 2021 - 8:22am.

This is getting funnier by the day. Done in by their own zestimates. Stock is off 20% today

https://on.mktw.net/3GLihuw

Submitted by scaredyclassic on November 3, 2021 - 9:58am.

If they'd tried this 5 years ago, they'd be geniuses. Just bad timing...

Submitted by sdrealtor on November 3, 2021 - 10:10am.

scaredyclassic wrote:
If they'd tried this 5 years ago, they'd be geniuses. Just bad timing...

6-9 months ago would've worked. They loaded up during q3 paying big premiums when prices were flattening.

The CEO blamed it on the difficulty of forecasting home values which is their supposed expertise. He undercut their entire value proposition with that PR gaff. He'll be looking for a new job soon

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