Barbara Corcoran on Zillow ending homebuying business

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Barbara Corcoran on Zillow ending home-buying business

Welcome to yahoo finance live in the real estate report. We are focusing in on the action playing out at zillow as shares absolutely get shellacked, and i’m not overusing. That term today shares off more than 20 percent, as zillow announced it plans to take write-downs of as much as 569 million dollars and is slashing its workforce by 25 Percent.

After failures, at its eye buying program, the company says it’s going to be winding down that segment of the business that had been trying to buy and flip houses, and it had not been going the way the company intended and for more on all that playing out Want to bring on Barbara Corcoran, of course you know her as the corker group founder and host of shark tank on abc and Barbara good to be chatting with you again, i mean a lot of people have been pointing out it’s difficult to fathom. You could have something like this not working out in one of the hottest real estate markets in a while, but uh

I guess there are some problems there at zillow.

What do you make of? Maybe the idea of that many losses. Stacking up. Well, you know, ceo richard burton is – is a phenomenal businessman, he’s a disrupter, he disrupted the uh, the travel space with expedia he disrupted totally. The real estate space with zillow and the other brands that he owns

It’s really a conglomerate, so no one really thought they could stumble

But what he did and i’m sure he gave it a lot of thought and i’m sure he was well advised by a lot of committees.

But what he did was he went into a space that has nothing to do with finding homes for people it’s buying homes for flipping and none of the stars align. I just i remember at the time thinking what the heck is he doing that, for it makes no sense at all, and i got it because it was very appealing and tempting at the time to know that you controlled the whole house hunting market and you had Access to all these sellers the moment they wanted to sell so who wouldn’t be tempted to say, hey, let’s cash in guys and let’s buy these houses, i think most of us would have reached the same conclusion. However, the part that was overlooked was the market is volatile and that that he said i think in some press release. He was surprised how surprised the market was volatile.

That’S real estate, it’s always up down in between it never stays the same, and what also happened is he never predicted how difficult it is to renovate a home close it and put it back for sale and that’s the juggernaut in this whole thing that he couldn’t Get past and that really has been the problem that he has great concept, but for anybody, who’s renovated a kitchen.

You know how hard it is to get a contractor, and in these days finding help is impossible. So he really bit off a lot more than i’m sure he ever envisioned that he would have to chew yeah Barbara. We have a big fed decision in just over an hour here and i’m bringing it up because interest rate they matter to your business. The cost of capital and we’re expecting an announcement of the taper, i’m not going to get in the weeds there, but eventually we’re going to see higher rates here in the? U

We think uh, How does that affect the deal pipeline that you deal with on a day-to-day basis?

You know i’m really not worried about interest rates. Of course, they’re exorbitantly low and people assume it’s a american right now like they breathe and they get low interest rates right.

But i don’t think the fed has made any announcements to do anything abruptly. I think they’re going to increase the rates little by little over the next few years, or so they say. I don’t know why.

I would mistrust that, but the market can certainly absorb it. Will it tailor to take down the market or make it pause?

No, it will make house owning expensive, but what the buyers have proven over the last year at least year and a half is they’re willing to pay more and pay more, and so the interest will be added to it. But as long as it’s not a jerk up in interest prices, the consumer is more than happy to absorb that right. Now, that’s how strong the market is.

I don’t think it will have a big effect yeah. If i might have one thing immediately, the effect will be, it will help the market, because people will think the good old days are over people really jump and overpay for the next house.

Well, it could be a bit of a boost here, maybe to unwind some of the problems at zillow too, because i want to get back to that because you know some people are saying that this could be a buying opportunity and we’ve seen some buyers. I think kathy wood swooping in here to buy on this dip, as we see, shares off more than 20 and it sounds like you’re kind of confident still in the platform itself sounds like this was just a bit of a misstep in terms of rolling this out And really leaning into zillow offers a bit more than the company may uh should have uh. So i mean, would you be still confident what zilla can do here in terms of turning this around and getting out of it?

You know you’re reading my mind. I was thinking about that this morning.

Thinking, hey, Is this a great time to bet a jump, something that’s discounted? I think it’s close to 30 six months ago what an opportunity when someone controls the market i mean who could argue against that, but it depends on the cost of carrying those houses which they plan to sell to institutional investors. It.

It really depends upon how deep that inventory really is how much cash is being drained, and i don’t think we have those numbers yet.

So it’s a question of: is this all the problem over now they’re not going to do it anymore, but what about the old problem? And, what’s it going to cost the business to really unwind that so i’m not sure they’re out of the woods yet i’d be too hesitant myself! I’M sorry if i look like a scaredy cat, but i am okay, that’s fine! You got to protect your money, but just sticking with kind of the the theme of disruption within the real estate industry.

What other deals are you looking at or what other concepts that kind of caught your eye recently that we might not have seen before?

I don’t see anything in the real estate space. The last big disrupter was rich burton because he had the foresight to see that buyers wanted more control of how they shop for real estate. He saw the same uh challenge in the travel space and he capitalized on it. I haven’t seen anyone in the space i mean, i guess you could i i guess you could count open door who buys twice as many houses as zillow and i’m sure that had a lot to do with fueling those guys over there whoa look what they’re doing.

Let’S jump in there, i could almost be at that boardroom picturing, that that thing going down right, but open door, uh buys houses, flips houses and so far they’ve been in it twice as long as zillow seven years, i think close to seven years uh, but even Their uh confidence in eye buying is going to ripple through to them a little bit too

I think so you could say open doors, a disrupter buying homes everywhere and flipping them, but you can’t forget about the market. This is not a good flipping market. This is a buyers, a seller’s market where every home is dear, and how do you really make money on that spread? It’S tough not to even count for how do you get the workers to do the renovation? I don’t know what’s going on with open door, but it’ll be interesting to see how this really plays out yeah, it’s tough to find a lot of workers out there in a lot of different sectors, but i’m reminded of the last time we had john Barbara and Thinking back to kind of some of those calls, that’s why i wanted to ask you about: zillow is because you’ve been pretty spot on on a few things.

I remember asking about nikola and trevor milton and some of the issues there. Of course you love elon musk, and what he’s doing at tesla, we are going to be seeing a rivien come public, the amazon-backed electric car maker there at a valuation above 60 billion. If all goes well, but they’re going to be taken on tesla and they’re, One of your favorites in what they’re doing in the ev space, i’m just curious to get your take, maybe on on how you’re seeing the battle shape up there As we have rivien coming Out at evaluation, it’s gon na be more than honda and ford, potentially as they go up against tests.

Yeah, hey, that’s a great start, Isn’T it they come out of the gate, everybody’s believing them. That’S the easy part of selling the hard part of selling is keep the sale going and what you need to keep the sale going is a phenomenal leader.

Okay, Tesla. What’S great about him is he’s a phenomenal leader. Everybody gets um. Inspired by him, he’s almost become a business god that’s hard to compete with it’s not only the magic of salesmanship, but it’s the guts that go along with it that the guy has produced.

So who knows about the other?

Thanks again,

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