Zillow entering the Wholesale Market

[John Nachtigall]

I saw this in depth analysis of the Zillow Offers product.   This struck me

"Going back to Exhibit 4, renovation, holding, and selling costs have averaged 3.0%, 0.9%, and 4.5% of sales so far, leaving a return before financing of 1.6%. Interest has eaten up 0.8%, leaving a 0.8% margin after interest.

Clearly, bottom line profit margins are thin, but that is by design. The overarching strategy is to give homeowners the best deal Zillow can afford while still breaking even on the transaction. That will maximize adoption of Zillow Offers, and will drive lots of ancillary revenue streams."

Given that the typical wholesale offer is APV x 70% - renovation theoretically Zillow would offer a lot more to the typical "distressed" home seller.

Thoughts?   It is very common for a company like Zillow to enter a market at zero to negative margin to take up market share.   If people hit the Zillow Offer button instead of go to wholesalers that could sink a lot of individual business models.