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Honest question, why is it gross? Fixing up homes is very inefficient and usually done by mom and pops. Why not find an efficient model to do it, just like car

Honest question, why is it gross? Fixing up homes is very inefficient and usually done by mom and pops. Why not find an efficient model to do it, just like car manufacturing, chip fabrication, etc.? It's a massive industry and could be a boost to productivity, which is the ultimate driver of living standards in the long term

sidewndr46 4y ago
When it comes to housing where I live efficiency usually isn't a priority. If it was we'd all be living in the pods by this point.
DrPhish 4y ago
A lot of people are cash-poor and need to make up the difference with "sweat equity". That puts them in direct competition with professional flippers, since its the same unrealized value that is being leveraged. The difference is that for one its a tidy profit, whereas for the other its a way to own a home.
- lotsofpulp 4y ago
  Then the people needing to make up the difference with sweat equity should be able to pay more for the house than a professional flipper, since they do not need to account for the profit and costs of subcontractors of professional flippers.
  - DrPhish 4y ago
    unfortunately sweat equity (ie fixing a place up) doesn't add anything to your down payment from the bank's perspective. Cash poor is cash poor. Most people start off as young people or young couples with little to no cash and have to make their way in the world in the basic range of minimum wage and starting off with zero savings. Saying that corporate profits should come before home ownership for the average person is what was being thought of as "disgusting" earlier in this thread, I think
Dave_TRS 4y ago
I might have answered my own question - perhaps it's when we see corporations speculate and win it adds no value and is gross? But if they actually do come up with a better way to price houses and fix them efficiently it's a positive right?
- joxel 4y ago
  Maybe at the end of a long road of terrible home buying conditions for the entire country. One has to wonder if put together it would be a net positive.
  - lob_it 4y ago
    The buzzword of the week is macroeconomics. For the parachute pants aficianados, the 1980's used the term poison pill to thwart certain strategies. The linear explains a lot of "fun the mentals/fundamentals" in place in 2022. https://www.investopedia.com/terms/p/poisonpill.asp https://www.investopedia.com/terms/p/poisonpill.asp Layoffs, housing price decreases, used car decreases, crypto crashes, balloning interest rates. It looks like the updated strategy is "get them high enough to where the fall kills them" :) It does sound like a macroeconomic saying if you look at several linears for each :p
rbranson 4y ago
The profit from home flipping comes from asset speculation not construction. Only one of these creates net value.
- bpodgursky 4y ago
  I think the line is fuzzier than you'd think. There's a large grey area of old/marginal/condemned housing stock where buyers are making a tradeoff between a teardown + rebuild vs buying an old house and patching it up. Flippers who successfully rehabilitate an old house do increase the effective supply.
  - nrmitchi 4y ago
    > Flippers who successfully rehabilitate an old house do increase the effective supply. 100% agree that that is not what any of these ibuyer companies are/were doing.
  - nicoburns 4y ago
    Where I live (UK), I think most young people would be grateful for an increased supply of cheaper rundown houses to buy. Done up houses we can't afford don't help at all.
    - bpodgursky 4y ago
      The thing is, a flipper is going to sell, one way or another. They'll try to stake a higher price, but they'll sell low if there's no alternative. Supply, supply, supply is all that matters.
      - uoaei 4y ago
        "Guess the poors will just have to wait their turn" isn't really the great insight you think it is.
  - yesBut00 4y ago
Bilal_io 4y ago
It's gross in my opinion because they drive prices up. Not only the companies, but also individuals that purchase multiple homes to run a rental business. I want to see legislation that prohibits orgs from purchasing home to flip, and individuals to be taxed heavily for their 2nd+ home. If an org really wants to profit from real estate, go build new homes, there is a huge shortage, we don't need to competes with rich companies when trying to purchase a house.
- colinmhayes 4y ago
  How could people rent if it's prohibitively expensive to own multiple homes?
  - gadflyinyoureye 4y ago
    They won’t. This means that there will be properties eventually owned by a local taxing authority. What people don’t get is that you need some houses to sit empty. This allows people to find a place when they move. This allows people to move around within a territory. Also not all secondary houses are bad. I want to buy a plot of land for a small farm and a place to go in case of hurricanes. Presently there is no house. Should I be taxed for improving land for personal ways that didn’t remove housing? Many of the comments so far are emotional. We need to do better when making policies.
    - andsoitis 4y ago
      > Should I be taxed for improving land for personal ways that didn’t remove housing I’ve never done this so don’t know the answer, but when you build a house don’t you then also start to get government services in support of that house?
      - yesBut00 4y ago
    - yesBut00 4y ago
AlexandrB 4y ago
> It's a massive industry and could be a boost to productivity, which is the ultimate driver of living standards in the long term Is it thought? Productivity has been going up for 20 years, so have essentials like housing, healthcare, and education. Wages haven't kept pace. Efficiency in the service of inflating housing prices further seems like it's going to tank living standards for many people.
onlyrealcuzzo 4y ago
> Fixing up homes is very inefficient and usually done by mom and pops. This doesn't ipso-facto make it inefficient. There's evidence that construction does not become meaningfully more efficient with scale [1]. At GIGANTIC scales, you're looking at maybe 10% savings. And these scales are quite rare in the US & the EU - mostly only happening in Asia. True, on the largest investment of most people's lives - 10% is something... Anyway - you're not going to get great returns with layers of high-paid management and beat mom & pops by much. [1] https://constructionphysics.substack.com/p/why-are-there-so-few-economies-of https://constructionphysics.substack.com/p/why-are-there-so-...
oldstrangers 4y ago
Former real estate dude. There are a lot of reasons but I'll just run through a few: A company like Open Door can monopolize a local market very quickly. Pick up 10 listings in a neighborhood, suddenly they control all the comparable properties which means they dictate the housing prices. Or maybe they want to buy up the remaining home inventory in the surrounding areas, and they'll use 10 of their own properties to explain why your home is now worth less. Corporations can qualify for nearly interest free loans and offer up ridiculously high bids that most private individuals cannot hope to compete with. The effective buying power of a private individual vs a corporation is next to zero. Corporations probably don't want to flip the home in the short term, they might want it to be a rental for the next 10 years while it appreciates on the books. So in short, you have a system that can control the housing supply, control housing prices, force out real potential buyers, turn a lot of would be buyers into renters, all while increasing some billion dollar corporation's bottom line. Should absolutely be illegal.
- cragfar 4y ago
  All the companies that tried this failed spectacularly and closed up shop. Even with "free" money.
  - coding123 4y ago
    But what if one succeeds (or is but you don't know about it)?
    - uoaei 4y ago
      Yeah, and what if they gave away houses out of the goodness of their hearts? What-if games don't provide great insights in cases like these. Trust me, if it worked at these scales, you'd hear about it.
      - ABCLAW 4y ago
        There are plenty of REITs operating in my city that have substantial detached residential holdings. The EV on renting and holding substantially improves if the housing market takes off like a rocket. It might not work in your market, but that doesn't mean it doesn't exist.
noasaservice 4y ago
Would you be OK with pricing food so high that only a limited amount of people could eat, with the pure purpose of "make more money for our stakeholders"? How about the same, for water? How about the same, for basic medical? How about the same, for electricity? Profiteering and gatekeeping essential things to live is ethically abhorrent. And yes, housing SHOULD be a right. Instead we have "right to badmouth government" and a bunch of other 'self-actualization' (Maslow) style needs, but We collectively ignore the bottom ones, like food/water/shelter.
- prottog 4y ago
  > Instead we have "right to badmouth government" You should look at the track record of providing food, water, and shelter in places where you don't have a right to badmouth the government and instead had "rights" to things like food and shelter.
- lotsofpulp 4y ago
  >And yes, housing SHOULD be a right. This is easy to say. Can you elaborate how to implement this “right”? Do 330M people in the US have a “right” to live on the California coastline? It is doable, can always downsize to Hong Kong style living. Perhaps Hong Kong size abodes are too small. Then how much space do you propose per person and per family?
  - coding123 4y ago
    That is not doable, while there may be house space, the roads would turn to dust every 4 days. Or just be parking lots at that point.
    - lotsofpulp 4y ago
      People would have to use alternative modes of transport, and eschew individual cars, like people in Hong Kong. I do not understand “roads turning to dust” though.
  - andsoitis 4y ago
boringg 4y ago
They are doing it out of speculation - not improving the efficiency of the market. They thought that they had a lock for a large windfall of profits based on the trajectory of the housing market. People don't like that because that profit comes at the cost of people who are trying to find homes at a reasonable price. I am happy their model didn't work. Also I think you assume that their model would be efficient but I don't think it would - you still have to work with all the small mom and pop shops who are doing the actual renovation work and that quality is worker specific. There is no proof that Redfin's model would improve quality or efficiency. Add in redfin trying to guide the market buyer on the price to purchase with their price forecast mechanism ... which I would not be surprised if they boosted their own properties (speculation, but wouldn't be surprised at all).
dec0dedab0de 4y ago
If that is all it was, then that would be great. It would be nice If we had a handful of corporations that outsourced to local contractors to refurbish houses before reselling them, while taking a small profit for themselves. The problem is that these companies are more interested in driving up the price of housing, than they are in fulfilling the need to facilitate a market, and make repairs. So you end up with prices artificially driven up, and many properties being used as investments against inflation. Which means that people in lower valued homes are now unable to upgrade, which means that there is less available at the low end, which leads to more homelessness. I think local municipalities should enact speculator taxes, for anyone who owns an unoccupied property that was not recently inherited. Maybe you get 18 months after your parents die to either sell their home, or take on a tenant. There are properties near my house that have been for sale for over 15 years. Which means the speculators holding these properties have likely paid more in taxes than they will ever get for them. Basically I don't think that holding property hostage should not be a legal business, either you sell/rent it at the current market values, or you pay out the ass for the privilege to wait it out.
- nrmitchi 4y ago
  > I think local municipalities should enact speculator taxes, for anyone who owns an unoccupied property that was not recently inherited. Maybe you get 18 months after your parents die to either sell their home, or take on a tenant. I'd actually agree with this, with the addition of "or appeal as to why you can't". 18 months seems like a long time, but there are many situations where you just can't get something settled in that amount of time.
nrmitchi 4y ago
> Fixing up homes is very inefficient and usually done by mom and pops. Why not find an efficient model to do it I 100% agree with this premise. However this is not what Redfin/Opendoor/Zillow do. The most you're going to get regarding "fixing" is a very bad coat of paint, replacing a couple angle stops, and putting a full cover-plate over an outlet that seems iffy. These companies are not taking an unmarketable product, actually fixing it, and putting a restored property on the market. I agree that actual property restoration is a fantastic industry to optimize, and I could talk about this for way longer than is appropriate in this post. But the best you're getting from these companies are some lipstick-on-a-pig photos and a sellers disclosure that says "We never occupied the house so have no idea if there are any issues". There are also other financial-engineering-esque fashions in which they make money, which are all at the expense of residential home buyers. None of the ways are actually "improve the property".
- dpkirchner 4y ago
  Could you imagine if corporate buyers were required to upgrade everything to meet current code before selling? It'd likely kill the process dead, of course, but if not then at least we'd see improved homes as an outcome.
  - deelowe 4y ago
    If updating to current code was required, a lot of homes would have to be torn down.
    - dpkirchner 4y ago
      Sure, agreed. And I figure a corporate buyer would only go through with that is the home is bad enough that it's worth replacement. Most probably aren't, so they'll be left available for humans. It's win-win. (I fully acknowledge this is an unrealistic proposal.)
    - edmundsauto 4y ago
      Given that a lot of flippers/corporate buyers use corporations as a liability shield in case of something going wrong, they have less skin in the game than potentially negligent previous owners. It generally seems reasonable to treat individuals and corporations differently in terms of legal expectations, in part because of that.
uoaei 4y ago
Define "productivity" here, because my guess is that the metric in use does not represent median gains nearly as well as mean gains.
shagmin 4y ago
Isn't the more apt to compare this to car restoration/repair or something? Fixing up homes isn't like a factory you can streamline and automate. Just anecdotal, but the first house I bought had some issues that enabled me buy it at a discount and fix it up over time to my liking. I'm thankful I had that opportunity, and I still would've probably upgraded certain things if the flipper just went with the base options.
ars 4y ago
Because they do a terrible job at it. I looked at a flipped house once, and they built a laundry room - with no place for a dryer vent! (I guess they hoped no one would notice.) They had gas service in the home, but instead of running that to the dryer or range, they ran electric because it was cheaper to run a wire. Every single thing they did they picked the cheapest, worst, option. Anyone buying that home is in for an expensive annoying time as they have to re-fix tons of things they did. They had to change the plumbing in some areas, and instead of a 3/4 pipe, they ran 1/2 inch to far too many fixtures - you'll never notice, until you try to shower and run the dishwasher at the same time. It was just non-stop shortcuts. I made a policy of not even going to look at a home that was fixed without the owner actually living in it afterward.
- nemo44x 4y ago
  Hopefully the home inspector is noticing these things.Clearly permits weren't pulled for many of these things since they wouldn't pass code. But yes I agree, often flippers are taking every short cut they can to make something look nice to unsuspecting buyers but it will all fall apart in 5 years. Cheap vinyl windows is the biggest violators I've seen. Even in nice homes going for $1m.
orthecreedence 4y ago
> Why not find an efficient model to do it Efficient as in "most profitable?" That means changing a few cosmetic things about the property and charging the original value plus 2-3x the useless improvements that were made. When I was house hunting a few years ago, you'd see this all the time. Someone buys a crappy house: bad plumbing, bad electrical, leaky windows, foundation issues. What do they do? Put in some frosted glass Ikea cabinets, granite countertops (wooo fAnCy!!!1), and some crappy click-lock flooring. Then they charge 150K more for the house than they bought it for. This is my experience with flippers, and it's totally in line with "find an efficient model." They did find an efficient model: efficient for them, but sucky for the people who can no longer afford the home, and sucky for the poor sap who actually buys it and now has to dump another 200K into it to fix the real issues (and will likely end up ripping out the cabinets anyway because they are cheap and ugly). I know there are people who do good flips, and who fix the foundational issues, but I am willing to bet they are much more skewed toward the "mom and pop" flippers.
mandevil 4y ago
They aren't really in the business of fixing up a home, as other people have already said. The analogy for what they are trying to do is more like high-frequency trading (as the amazing and invaluable Matt Levine has pointed out for years). When you want to sell 100 shares of Company A, and someone else wants to buy 100 Shares of Company A, sometime you do so at just the same moment, and you can directly transact with them. However, almost all of the time you are selling and they are buying a few minutes apart. So called "Market Makers" (aka "High Frequency Traders" aka "Flash Boys") take the other side of both transactions, and get a very small cut (generally less than 1% on the modern stock market). They are basically in the business of time-arbitrage. Their goal is to almost always be net zero on the market- to have roughly the same number of buys and sells at any given moment, so that the market floats along smoothly and they make their tiny cut whether it is going up or down. And so the home buying version of this is, it is a real pain to have to find a buyer for every seller at the exact same moment. If we could similarly have a market-maker who can buy houses and sell houses when someone comes along looking to be the other side of that transaction, wouldn't it be awesome? You could take a tiny cut of the transaction, but what a big transaction! Just for some time arbitrage. Of course, the differences are stark: shares of stock are fundamentally fungible, whereas houses are almost as non-fungible as one can get. Stock transactions are quick and painless, and don't require months of work by teams of mortgage originators, with inspections and appraisals etc. It is difficult to be net-zero as a market maker in houses, since your inventory sits on your books for months and months, either appreciating (yay!) or depreciating (boo!). All of these are serious problems with the business model. The current wave of companies attempting this basically said "what if we fix this with <waves magic wand> Artificial Intelligence?" The actual answer is that they have once again found themselves in the business of picking up pennies in front of a steamroller- the fate of all arbitrage attempts that blow up.

sidewndr46 4y ago

When it comes to housing where I live efficiency usually isn't a priority. If it was we'd all be living in the pods by this point.

DrPhish 4y ago

A lot of people are cash-poor and need to make up the difference with "sweat equity". That puts them in direct competition with professional flippers, since its the same unrealized value that is being leveraged. The difference is that for one its a tidy profit, whereas for the other its a way to own a home.

lotsofpulp 4y ago
Then the people needing to make up the difference with sweat equity should be able to pay more for the house than a professional flipper, since they do not need to account for the profit and costs of subcontractors of professional flippers.
- DrPhish 4y ago
  unfortunately sweat equity (ie fixing a place up) doesn't add anything to your down payment from the bank's perspective. Cash poor is cash poor. Most people start off as young people or young couples with little to no cash and have to make their way in the world in the basic range of minimum wage and starting off with zero savings. Saying that corporate profits should come before home ownership for the average person is what was being thought of as "disgusting" earlier in this thread, I think

Dave_TRS 4y ago

I might have answered my own question - perhaps it's when we see corporations speculate and win it adds no value and is gross? But if they actually do come up with a better way to price houses and fix them efficiently it's a positive right?

joxel 4y ago
Maybe at the end of a long road of terrible home buying conditions for the entire country. One has to wonder if put together it would be a net positive.
- lob_it 4y ago
  The buzzword of the week is macroeconomics. For the parachute pants aficianados, the 1980's used the term poison pill to thwart certain strategies. The linear explains a lot of "fun the mentals/fundamentals" in place in 2022. https://www.investopedia.com/terms/p/poisonpill.asp https://www.investopedia.com/terms/p/poisonpill.asp Layoffs, housing price decreases, used car decreases, crypto crashes, balloning interest rates. It looks like the updated strategy is "get them high enough to where the fall kills them" :) It does sound like a macroeconomic saying if you look at several linears for each :p

rbranson 4y ago

The profit from home flipping comes from asset speculation not construction. Only one of these creates net value.

bpodgursky 4y ago
I think the line is fuzzier than you'd think. There's a large grey area of old/marginal/condemned housing stock where buyers are making a tradeoff between a teardown + rebuild vs buying an old house and patching it up. Flippers who successfully rehabilitate an old house do increase the effective supply.
- nrmitchi 4y ago
  > Flippers who successfully rehabilitate an old house do increase the effective supply. 100% agree that that is not what any of these ibuyer companies are/were doing.
- nicoburns 4y ago
  Where I live (UK), I think most young people would be grateful for an increased supply of cheaper rundown houses to buy. Done up houses we can't afford don't help at all.
  - bpodgursky 4y ago
    The thing is, a flipper is going to sell, one way or another. They'll try to stake a higher price, but they'll sell low if there's no alternative. Supply, supply, supply is all that matters.
    - uoaei 4y ago
      "Guess the poors will just have to wait their turn" isn't really the great insight you think it is.
- yesBut00 4y ago

Bilal_io 4y ago

It's gross in my opinion because they drive prices up. Not only the companies, but also individuals that purchase multiple homes to run a rental business. I want to see legislation that prohibits orgs from purchasing home to flip, and individuals to be taxed heavily for their 2nd+ home. If an org really wants to profit from real estate, go build new homes, there is a huge shortage, we don't need to competes with rich companies when trying to purchase a house.

colinmhayes 4y ago
How could people rent if it's prohibitively expensive to own multiple homes?
- gadflyinyoureye 4y ago
  They won’t. This means that there will be properties eventually owned by a local taxing authority. What people don’t get is that you need some houses to sit empty. This allows people to find a place when they move. This allows people to move around within a territory. Also not all secondary houses are bad. I want to buy a plot of land for a small farm and a place to go in case of hurricanes. Presently there is no house. Should I be taxed for improving land for personal ways that didn’t remove housing? Many of the comments so far are emotional. We need to do better when making policies.
  - andsoitis 4y ago
    > Should I be taxed for improving land for personal ways that didn’t remove housing I’ve never done this so don’t know the answer, but when you build a house don’t you then also start to get government services in support of that house?
    - yesBut00 4y ago
  - yesBut00 4y ago

AlexandrB 4y ago

> It's a massive industry and could be a boost to productivity, which is the ultimate driver of living standards in the long term Is it thought? Productivity has been going up for 20 years, so have essentials like housing, healthcare, and education. Wages haven't kept pace. Efficiency in the service of inflating housing prices further seems like it's going to tank living standards for many people.

onlyrealcuzzo 4y ago

> Fixing up homes is very inefficient and usually done by mom and pops. This doesn't ipso-facto make it inefficient. There's evidence that construction does not become meaningfully more efficient with scale [1]. At GIGANTIC scales, you're looking at maybe 10% savings. And these scales are quite rare in the US & the EU - mostly only happening in Asia. True, on the largest investment of most people's lives - 10% is something... Anyway - you're not going to get great returns with layers of high-paid management and beat mom & pops by much. [1] https://constructionphysics.substack.com/p/why-are-there-so-few-economies-of https://constructionphysics.substack.com/p/why-are-there-so-...

oldstrangers 4y ago

Former real estate dude. There are a lot of reasons but I'll just run through a few: A company like Open Door can monopolize a local market very quickly. Pick up 10 listings in a neighborhood, suddenly they control all the comparable properties which means they dictate the housing prices. Or maybe they want to buy up the remaining home inventory in the surrounding areas, and they'll use 10 of their own properties to explain why your home is now worth less. Corporations can qualify for nearly interest free loans and offer up ridiculously high bids that most private individuals cannot hope to compete with. The effective buying power of a private individual vs a corporation is next to zero. Corporations probably don't want to flip the home in the short term, they might want it to be a rental for the next 10 years while it appreciates on the books. So in short, you have a system that can control the housing supply, control housing prices, force out real potential buyers, turn a lot of would be buyers into renters, all while increasing some billion dollar corporation's bottom line. Should absolutely be illegal.

cragfar 4y ago
All the companies that tried this failed spectacularly and closed up shop. Even with "free" money.
- coding123 4y ago
  But what if one succeeds (or is but you don't know about it)?
  - uoaei 4y ago
    Yeah, and what if they gave away houses out of the goodness of their hearts? What-if games don't provide great insights in cases like these. Trust me, if it worked at these scales, you'd hear about it.
    - ABCLAW 4y ago
      There are plenty of REITs operating in my city that have substantial detached residential holdings. The EV on renting and holding substantially improves if the housing market takes off like a rocket. It might not work in your market, but that doesn't mean it doesn't exist.

noasaservice 4y ago

Would you be OK with pricing food so high that only a limited amount of people could eat, with the pure purpose of "make more money for our stakeholders"? How about the same, for water? How about the same, for basic medical? How about the same, for electricity? Profiteering and gatekeeping essential things to live is ethically abhorrent. And yes, housing SHOULD be a right. Instead we have "right to badmouth government" and a bunch of other 'self-actualization' (Maslow) style needs, but We collectively ignore the bottom ones, like food/water/shelter.

prottog 4y ago
> Instead we have "right to badmouth government" You should look at the track record of providing food, water, and shelter in places where you don't have a right to badmouth the government and instead had "rights" to things like food and shelter.
lotsofpulp 4y ago
>And yes, housing SHOULD be a right. This is easy to say. Can you elaborate how to implement this “right”? Do 330M people in the US have a “right” to live on the California coastline? It is doable, can always downsize to Hong Kong style living. Perhaps Hong Kong size abodes are too small. Then how much space do you propose per person and per family?
- coding123 4y ago
  That is not doable, while there may be house space, the roads would turn to dust every 4 days. Or just be parking lots at that point.
  - lotsofpulp 4y ago
    People would have to use alternative modes of transport, and eschew individual cars, like people in Hong Kong. I do not understand “roads turning to dust” though.
- andsoitis 4y ago

boringg 4y ago

They are doing it out of speculation - not improving the efficiency of the market. They thought that they had a lock for a large windfall of profits based on the trajectory of the housing market. People don't like that because that profit comes at the cost of people who are trying to find homes at a reasonable price. I am happy their model didn't work. Also I think you assume that their model would be efficient but I don't think it would - you still have to work with all the small mom and pop shops who are doing the actual renovation work and that quality is worker specific. There is no proof that Redfin's model would improve quality or efficiency. Add in redfin trying to guide the market buyer on the price to purchase with their price forecast mechanism ... which I would not be surprised if they boosted their own properties (speculation, but wouldn't be surprised at all).

dec0dedab0de 4y ago

If that is all it was, then that would be great. It would be nice If we had a handful of corporations that outsourced to local contractors to refurbish houses before reselling them, while taking a small profit for themselves. The problem is that these companies are more interested in driving up the price of housing, than they are in fulfilling the need to facilitate a market, and make repairs. So you end up with prices artificially driven up, and many properties being used as investments against inflation. Which means that people in lower valued homes are now unable to upgrade, which means that there is less available at the low end, which leads to more homelessness. I think local municipalities should enact speculator taxes, for anyone who owns an unoccupied property that was not recently inherited. Maybe you get 18 months after your parents die to either sell their home, or take on a tenant. There are properties near my house that have been for sale for over 15 years. Which means the speculators holding these properties have likely paid more in taxes than they will ever get for them. Basically I don't think that holding property hostage should not be a legal business, either you sell/rent it at the current market values, or you pay out the ass for the privilege to wait it out.

nrmitchi 4y ago
> I think local municipalities should enact speculator taxes, for anyone who owns an unoccupied property that was not recently inherited. Maybe you get 18 months after your parents die to either sell their home, or take on a tenant. I'd actually agree with this, with the addition of "or appeal as to why you can't". 18 months seems like a long time, but there are many situations where you just can't get something settled in that amount of time.

nrmitchi 4y ago

> Fixing up homes is very inefficient and usually done by mom and pops. Why not find an efficient model to do it I 100% agree with this premise. However this is not what Redfin/Opendoor/Zillow do. The most you're going to get regarding "fixing" is a very bad coat of paint, replacing a couple angle stops, and putting a full cover-plate over an outlet that seems iffy. These companies are not taking an unmarketable product, actually fixing it, and putting a restored property on the market. I agree that actual property restoration is a fantastic industry to optimize, and I could talk about this for way longer than is appropriate in this post. But the best you're getting from these companies are some lipstick-on-a-pig photos and a sellers disclosure that says "We never occupied the house so have no idea if there are any issues". There are also other financial-engineering-esque fashions in which they make money, which are all at the expense of residential home buyers. None of the ways are actually "improve the property".

dpkirchner 4y ago
Could you imagine if corporate buyers were required to upgrade everything to meet current code before selling? It'd likely kill the process dead, of course, but if not then at least we'd see improved homes as an outcome.
- deelowe 4y ago
  If updating to current code was required, a lot of homes would have to be torn down.
  - dpkirchner 4y ago
    Sure, agreed. And I figure a corporate buyer would only go through with that is the home is bad enough that it's worth replacement. Most probably aren't, so they'll be left available for humans. It's win-win. (I fully acknowledge this is an unrealistic proposal.)
  - edmundsauto 4y ago
    Given that a lot of flippers/corporate buyers use corporations as a liability shield in case of something going wrong, they have less skin in the game than potentially negligent previous owners. It generally seems reasonable to treat individuals and corporations differently in terms of legal expectations, in part because of that.

uoaei 4y ago

Define "productivity" here, because my guess is that the metric in use does not represent median gains nearly as well as mean gains.

shagmin 4y ago

Isn't the more apt to compare this to car restoration/repair or something? Fixing up homes isn't like a factory you can streamline and automate. Just anecdotal, but the first house I bought had some issues that enabled me buy it at a discount and fix it up over time to my liking. I'm thankful I had that opportunity, and I still would've probably upgraded certain things if the flipper just went with the base options.

ars 4y ago

Because they do a terrible job at it. I looked at a flipped house once, and they built a laundry room - with no place for a dryer vent! (I guess they hoped no one would notice.) They had gas service in the home, but instead of running that to the dryer or range, they ran electric because it was cheaper to run a wire. Every single thing they did they picked the cheapest, worst, option. Anyone buying that home is in for an expensive annoying time as they have to re-fix tons of things they did. They had to change the plumbing in some areas, and instead of a 3/4 pipe, they ran 1/2 inch to far too many fixtures - you'll never notice, until you try to shower and run the dishwasher at the same time. It was just non-stop shortcuts. I made a policy of not even going to look at a home that was fixed without the owner actually living in it afterward.

nemo44x 4y ago
Hopefully the home inspector is noticing these things.Clearly permits weren't pulled for many of these things since they wouldn't pass code. But yes I agree, often flippers are taking every short cut they can to make something look nice to unsuspecting buyers but it will all fall apart in 5 years. Cheap vinyl windows is the biggest violators I've seen. Even in nice homes going for $1m.

orthecreedence 4y ago

> Why not find an efficient model to do it Efficient as in "most profitable?" That means changing a few cosmetic things about the property and charging the original value plus 2-3x the useless improvements that were made. When I was house hunting a few years ago, you'd see this all the time. Someone buys a crappy house: bad plumbing, bad electrical, leaky windows, foundation issues. What do they do? Put in some frosted glass Ikea cabinets, granite countertops (wooo fAnCy!!!1), and some crappy click-lock flooring. Then they charge 150K more for the house than they bought it for. This is my experience with flippers, and it's totally in line with "find an efficient model." They did find an efficient model: efficient for them, but sucky for the people who can no longer afford the home, and sucky for the poor sap who actually buys it and now has to dump another 200K into it to fix the real issues (and will likely end up ripping out the cabinets anyway because they are cheap and ugly). I know there are people who do good flips, and who fix the foundational issues, but I am willing to bet they are much more skewed toward the "mom and pop" flippers.

mandevil 4y ago

They aren't really in the business of fixing up a home, as other people have already said. The analogy for what they are trying to do is more like high-frequency trading (as the amazing and invaluable Matt Levine has pointed out for years). When you want to sell 100 shares of Company A, and someone else wants to buy 100 Shares of Company A, sometime you do so at just the same moment, and you can directly transact with them. However, almost all of the time you are selling and they are buying a few minutes apart. So called "Market Makers" (aka "High Frequency Traders" aka "Flash Boys") take the other side of both transactions, and get a very small cut (generally less than 1% on the modern stock market). They are basically in the business of time-arbitrage. Their goal is to almost always be net zero on the market- to have roughly the same number of buys and sells at any given moment, so that the market floats along smoothly and they make their tiny cut whether it is going up or down. And so the home buying version of this is, it is a real pain to have to find a buyer for every seller at the exact same moment. If we could similarly have a market-maker who can buy houses and sell houses when someone comes along looking to be the other side of that transaction, wouldn't it be awesome? You could take a tiny cut of the transaction, but what a big transaction! Just for some time arbitrage. Of course, the differences are stark: shares of stock are fundamentally fungible, whereas houses are almost as non-fungible as one can get. Stock transactions are quick and painless, and don't require months of work by teams of mortgage originators, with inspections and appraisals etc. It is difficult to be net-zero as a market maker in houses, since your inventory sits on your books for months and months, either appreciating (yay!) or depreciating (boo!). All of these are serious problems with the business model. The current wave of companies attempting this basically said "what if we fix this with <waves magic wand> Artificial Intelligence?" The actual answer is that they have once again found themselves in the business of picking up pennies in front of a steamroller- the fate of all arbitrage attempts that blow up.