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What happens when private equity buys homes in your neighborhood

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61 points pseudolus | 2 comments | 09 Sep 25 17:32 UTC | HN request time: 0.001s | source
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Animats ◴[09 Sep 25 18:44 UTC] No.45186663[source]▶
Is this persisting now that the zero interest rate era is over? It would have been profitable during the cheap money era, but is it still?
replies(1): >>45187090 #
bombcar ◴[09 Sep 25 19:06 UTC] No.45187090[source]▶
The stories about "companies buying houses way over value" were around for awhile; IIRC there were some "AI powered home buying" things related to Zillow, etc that would get in fights with each other and themselves.

Zero interest rate certainly made it much more possible; buying a $500k house and having nearly no holding costs, and worst case scenario selling it for $500k is way different than buying the same $500k house, paying $2k a month in carrying costs (interest alone) and then having to sell it for $450k? That hurts, and hurts hard.

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1. bluGill ◴[09 Sep 25 19:48 UTC] No.45187753[source]▶
The problem with AI and Zillow is they forget "due diligence" matters. I know someone who sold a friend to Zillow for $20k less than market - they knew, as would anyone who did an inspection that there was rot issues and the correct value was around 100k less than market (which would then allow giving a builder $80k and 3 months to fix the issue before selling). Zillow tried to put a fresh coat of paint and sell the house. Now there is value in someone like Zillow coming in with $20k cash today to buy your house ($20k might be the wrong number, but lets accept it for discussion), and then selling it for market a few months later when someone wants it, but they need to do that due diligence.

That is why Zillow got out of the business even when rates were near zero, doing that due diligence is something they were not prepared to do since it requires humans to do work. (even if it is just taking pictures for the AI, to look at)

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2. bombcar ◴[09 Sep 25 21:21 UTC] No.45189360[source]▶
I remember the discussion pointed out that as long as they had "assumed due diligence" because they were randomly selecting properties in tests, they did fine.

But once word got out "sell your shithole to Zillow, they don't even check" of course EVERY shithole went to them.

Tragedy of the Venture Capitalists or something.