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Wall Street Uses Proptech to Eat Up Starter Homes

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A business that’s aimed at simplifying the process of selling homes has created a secret pipeline for big investors to buy properties, often in communities of color. A Bloomberg News analysis of more than 100,000 property records reveals that a few real estate companies, including Zillow (ZG), are flipping properties to some big names in global finance. Two out of 10 homes flipped by iBuyers last year went to investors and other institutional entities, a rate that doubles to four homes in some Sun Belt metros. These flips are also happening disproportionately in communities of color. “It just doesn’t feel right,” said Mike DelPrete, a scholar-in-residence at the University of Colorado Boulder, who studies iBuyers. “These companies go around saying, ‘We’re going to help mom and pop and inject liquidity into the market.’ They don’t say, ‘We’re going to suck up houses from the ordinary market and sell them to Wall Street.’” Proptech firms backed by Wall Street are buying homes from online real estate marketplaces at a rapid clip, making things even harder for regular, hardworking Americans who want to buy starter homes. While home flipping is an old business, the rise of digital transactions removes a lot of friction for institutional buyers and landlords who have plenty of cash to spend.