Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Bloomberg recently published a good summary of Zillow's business and their move into algorithm home buying and flipping. (They are trying to avoid the "flipping" moniker because of the negative connotations associated with it.) Zillow started buying homes directly from owners last spring. They charge the seller between 6-9%, so more than using a typical agent, but inline with their competitors. There's clearly a segment of the market willing to pay a premium for the added convenience. The thinking used to be that discount brokerages were the way to disrupt the housing market. This is the opposite strategy. Interestingly enough, Zillow felt that they needed to make this pivot with their business model. It used to be about selling ads. They were definitive in that they were not a disruptor of real estate agents. But now:
If getting an offer from an iBuyer became a crucial step in the selling process, they worried, Zillow could lose its audience and its advertising base. What’s more, market researchers kept finding that consumers said they’d pay a modest premium to get a cash offer. “People expect to press a button and have magic happen,” says Rascoff, a 43-year-old former Expedia executive who’d earlier started the travel search engine Hotwire, which he sold to Expedia for $700 million. Getting into the business of buying homes directly, Rascoff says, was “the only way to remain in a leadership position.”
Here is a map of the companies in this particular space and the cities in which they operate:
Some investors aren't sold on this strategy and have begun short selling Zillow (according to the Bloomberg article). I keep getting the sense that there's a greater end game in the cards here. It is about building up A (algorithmic home buying and flipping) in order to unlock B. But what's B -- a new end-to-end transactional model for the housing market?
Over the weekend I received an Amazon Echo as a gift. I set it up in my kitchen on Sunday morning and had it playing music and telling me the weather in no time. I also setup a couple of “routines” so that when I say things, such as “good morning”, it cycles through the weather, the news, and some other things that I might find valuable at the start of my day. It is pretty neat.
The truth is that I have actually been avoiding voice assistants since they were first launched. As much as I consider myself an early adopter, I have been generally uncomfortable with the idea that my voice commands, and perhaps other things, are being stored by Amazon. There are ways to delete that history, but I am not yet sure if that’s enough for me. Am I going to be served an ad because of something I mention in my own home?
Now that I’ve been trying it out for a few days, I will say that it is incredibly useful. I immediately see the value. I use it to control some of my lights. I ask it things when I’m cooking and my hands are dirty: “Alexa, how badly are the Raptors going to beat the Bucks this Thursday?” And I use it to play music. But is all of this a fair exchange for the creepy feeling that they create?
I’m not sure. But it certainly feels like the future.
I have been writing about the real estate startup Opendoor for many years here on the blog. Another promising startup in this space is Knock, and today it was announced that they just raised a $400 million Series B round (led by Foundry Group).
They share some similarities with Opendoor, but they are also different in that their focus is on home trade-ins. They tell you what your current home is worth, help you find a new home, and then coordinate “a seamless swap.” For more on how they work, go here.
One of the ways in which they are similar to Opendoor is that they front the cash for new home purchases. In the case of Opendoor, they buy your home with the plan of selling it in the future. And with Knock, they buy your home with the understanding that your old home will get sold.
It is certainly a more capital intensive model compared to the way that home sales are handled today. But many investors are clearly betting that it is exactly what is needed to change the status quo.
(Credit to Jeremiah Shamess for sharing the above news with me today.)
Bloomberg recently published a good summary of Zillow's business and their move into algorithm home buying and flipping. (They are trying to avoid the "flipping" moniker because of the negative connotations associated with it.) Zillow started buying homes directly from owners last spring. They charge the seller between 6-9%, so more than using a typical agent, but inline with their competitors. There's clearly a segment of the market willing to pay a premium for the added convenience. The thinking used to be that discount brokerages were the way to disrupt the housing market. This is the opposite strategy. Interestingly enough, Zillow felt that they needed to make this pivot with their business model. It used to be about selling ads. They were definitive in that they were not a disruptor of real estate agents. But now:
If getting an offer from an iBuyer became a crucial step in the selling process, they worried, Zillow could lose its audience and its advertising base. What’s more, market researchers kept finding that consumers said they’d pay a modest premium to get a cash offer. “People expect to press a button and have magic happen,” says Rascoff, a 43-year-old former Expedia executive who’d earlier started the travel search engine Hotwire, which he sold to Expedia for $700 million. Getting into the business of buying homes directly, Rascoff says, was “the only way to remain in a leadership position.”
Here is a map of the companies in this particular space and the cities in which they operate:
Some investors aren't sold on this strategy and have begun short selling Zillow (according to the Bloomberg article). I keep getting the sense that there's a greater end game in the cards here. It is about building up A (algorithmic home buying and flipping) in order to unlock B. But what's B -- a new end-to-end transactional model for the housing market?
Over the weekend I received an Amazon Echo as a gift. I set it up in my kitchen on Sunday morning and had it playing music and telling me the weather in no time. I also setup a couple of “routines” so that when I say things, such as “good morning”, it cycles through the weather, the news, and some other things that I might find valuable at the start of my day. It is pretty neat.
The truth is that I have actually been avoiding voice assistants since they were first launched. As much as I consider myself an early adopter, I have been generally uncomfortable with the idea that my voice commands, and perhaps other things, are being stored by Amazon. There are ways to delete that history, but I am not yet sure if that’s enough for me. Am I going to be served an ad because of something I mention in my own home?
Now that I’ve been trying it out for a few days, I will say that it is incredibly useful. I immediately see the value. I use it to control some of my lights. I ask it things when I’m cooking and my hands are dirty: “Alexa, how badly are the Raptors going to beat the Bucks this Thursday?” And I use it to play music. But is all of this a fair exchange for the creepy feeling that they create?
I’m not sure. But it certainly feels like the future.
I have been writing about the real estate startup Opendoor for many years here on the blog. Another promising startup in this space is Knock, and today it was announced that they just raised a $400 million Series B round (led by Foundry Group).
They share some similarities with Opendoor, but they are also different in that their focus is on home trade-ins. They tell you what your current home is worth, help you find a new home, and then coordinate “a seamless swap.” For more on how they work, go here.
One of the ways in which they are similar to Opendoor is that they front the cash for new home purchases. In the case of Opendoor, they buy your home with the plan of selling it in the future. And with Knock, they buy your home with the understanding that your old home will get sold.
It is certainly a more capital intensive model compared to the way that home sales are handled today. But many investors are clearly betting that it is exactly what is needed to change the status quo.
(Credit to Jeremiah Shamess for sharing the above news with me today.)
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