[VIP] Zillow’s Possible Long Game: Mortgages and iBuyer

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It's VIP Content Week, as I am home for several days without any travel. All that changes next week, but... in the meantime, I thought it worth putting together some posts for subscribers that reflect some of the things I've been working on in recent weeks.

One topic that keeps coming up both online and offline is how iBuyers can possibly hope to stay in business with such thin margins. All of them, supposedly, are losing thousands per transaction... and margins are thin, thin, thin: Zillow reported 0.5% post-interest margins on its Homes division recently.

I have long held a theory that the entire iBuyer movement is not about houses, not about spread between buy and sell, and not about commissions. This post from 2016 lays out the theory.

Well, I've done a bit of research, and I thought I would present some preliminary numbers to you all along with more of an explanation of my hypothesis. At this point, I would like to remind you that I'm talking about Zillow so much because they're the only ones who publish their iBuyer numbers. Redfin is a public company, and they do report segment information, but not the level of detail that Zillow has and does. What follows applies to all market maker style iBuyers: Opendoor, Offerpad, Redfin, Zillow and whoever else that buys and sells properties on their own balance sheets.

I'd also like to remind everybody that no one from Opendoor, Zillow, Redfin, Offerpad or anywhere else has ever said anything approaching what I'm laying out. This is pure hypothesis and pure speculation.
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