Shares of Zillow sank when the company said it would start flipping homes, but Zillow Group CEO Spencer Rascoff told CNBC that the move would have a bigger payoff than investors might think.
“We think of it like Netflix moving into originals,” Rascoff told “Mad Money” host Jim Cramer in a Monday interview. “They used their data advantage and then they built that muscle memory, that DNA, to be creative. And it was a big swing for them and obviously it’s created a huge business.”
Zillow’s plan, called Instant Offers, will allow home sellers to use the company’s online database to compare offers from potential buyers including Zillow itself.
If Zillow wins the offer, the company will aim to flip the home within 90 days and re-list it as quickly as possible with one of its premier real estate agents.
In some cases, Zillow will leverage its buyer data to advertise homes to prospective buyers before Zillow officially purchases and flips them, Rascoff said.
“We don’t think of it as a flipping business – flipping is really about taking advantage of a distressed seller,” the CEO said. “What we’re trying to do is provide a service to a seller so they don’t have to deal with the difficulty, the complexity, the uncertainty, the time of selling [their home].”
Rascoff also likened the plan, which is currently undergoing testing in Phoenix and Las Vegas, to Amazon’s push into Amazon Web Services.
“We don’t think of it as a pivot, we think of it as an extension” of Zillow’s existing model, Rascoff told Cramer. “We think it is additive to the core.”
Adding that “business is good” overall, the CEO said that the plan reflects the shifting demands of modern consumers.
“What’s happened in the whole economy is consumer expectations have changed. They want to press a button and have magic happen, whether it’s in food delivery or transportation or consumption of media, and that revolution is coming to real estate,” the CEO said. “So what we’re doing with Instant Offers is we’re letting a homeowner get an instant offer for the sale of their home, and that’s very appealing to a lot of consumers.”
“It has been controversial, but we think we can mitigate risk and we think the opportunity is large,” Rascoff said. “This is what the on-demand economy is all about.”
Disclosure: Cramer’s charitable trust owns shares of Amazon.
Questions for Cramer?
Call Cramer: 1-800-743-CNBCWant to take a deep dive into Cramer’s world? Hit him up!
Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram – VineQuestions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com
