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The risk is in sitting on a lot of properties and getting overextended during a downturn. I think that can be mitigated because Zillow/Opendoor's model is not to buy and hold, but to:

1. buy at a discount (essentially a fee for the service of selling your house with a click)

2. sell at a markup (we're talking a small one in most cases, but the fact is in a good market you can reliably print small amounts of money with some paint, some minimal landscaping, and new kitchen appliances. Zillow will not be using a high-interest loan for the purchase or repair, so they will not be sweating like your typical flipper on TV.)

Assume for the sake of argument that Zillow has data to decide where these bets are safest based on comparables and key economic indicators. And they will say no to sellers as often as the data suggests they should.

I don't think this has much to do with finding super-profitable deals with data, but with reliably shaving points off a large pipeline of deals.

If it doesn't work in a healthy economy, they stand to lose the difference between the discounted price they paid for a house and the market value they can sell it for. In a recession, they can probably stay afloat by renting properties they can't sell at a decent price.

[toomuchtodo]

With regards to your point about expensive financing, this moves Zillow from tech company to REIT; a dangerous shift in a rising interest rate environment depending on how long they end up having to hold inventory for.

We are very far along in the current economic cycle, and a downturn is inevitable. It would be unwise to be sitting on a large real estate portfolio you can’t quickly unload when that occurs.

Will be interesting to see if this Hail Mary pays off.