On today’s show we are taking a close look at one of the most insane ideas to hit the market this year.
In a bull market, everyone looks like a genius. But there is a cautionary tale here. Don’t ever mistake intelligence for luck in a bull market situation and that seems to be what Zillow has done over the past year with its Zillow Offers business.
Let’s recap how Zillow offers was supposed to work.
Zillow was using their really sophisticated software algorithm that produces the Z-Estimate to find value in the market. Zillow got into the house flipping business with Z-offers. The idea was that Zillow would buy properties in the open market, conduct a very light rehab, and then sell them in the open market for a profit.
They were not going to be creating much in the way of real value, as a stated objective of the program. So the only way for them to generate a profit would rely upon buying properties at a discount to the market value.
What Zillow would do is they would look at comparable properties in the market and then buy those it considered to be a bargain based on its algorithm. What could go wrong? Listen to find out.
Host: Victor Menasce