[josefwasinski]

What Zillow are doing is charging for certainty, buying a house is a huge financial decision - with potential risks.

As a seller, how much do I value a certain payout today? It's at least a few % points.

As a buyer, how much do I value a property which has been "Approved" and been fixed up? Again at least a few % points.

They can easily get a 5% margin, if not closer to 10% (especially if they do value-add improvements)

Then it is just about managing inventory, and not being overly exposed during a downturn - however depending on how their capital is structured are there is the opportunity to rent until it can be sold.

[SomewhatLikely]

I question how much value Zillow would be adding. Inspectors should be playing the role of approvers. And most sellers value getting the biggest offer. If Zillow develops a reputation of offering you less than market value then people will stop taking that offer. Also, if the house is actually changing ownership to Zillow then in some states they would owe at least an excise tax on each sale.

[rco8786]

What they’re doing is an extremely common thing and proven business model.

There are lots of interesting things you can do to consistently buy “below” market value. Don’t use a realtor, that’s 3-6% savings. Buying in cash and guaranteeing a smooth closing is incentivizing to a lot of sellers, another couple % points. Etc.