Spencer Rascoff turned Zillow into a powerhouse for residential real estate.
Zillow’s sites and apps, used by some looking to buy a new home and by most as a way to see the estimated value of their wealthy friend’s home, has 231 million visitors a month.
Rascoff said he knew the firm made it when it was mocked by Saturday Night Live in 2021. The skit compared Zillow browsing to pornography.
“The inside story there is that was not planned or paid for, that was completely organic,” said Rascoff.
But Rascoff, who left Zillow in 2019, was eager to talk about his next venture, Pacaso, during a conversation with The Real Deal’s publisher Amir Korangy at TRD’s annual forum in Los Angeles at the Beverly Wilshire.
Rascoff started Pacaso with Austin Allison in 2020 to “democratize” the second home market.
The platform allows people to buy a one-eighth ownership stake in a vacation home through an LLC. Pacaso buys the property and then sells shares to buyers. Investors in the property have to wait until all ownership interests have been sold or at least 12 months until they can sell their shares.
The business model might sound like a timeshare, but Rascoff stresses it’s not; the company’s website features a blog post explaining the differences.
“A timeshare is a liability not an asset,” said Rascoff. “It’s an obligation to stay at a hotel, at a discounted rate forever, it’s very difficult to get out.”
Timeshares are mocked as a bad investment. Actually, the worst investment. The concept brings up dreary images of dated hotels near ski resorts or Disney World. Timeshares investors sometimes have no real ownership of these properties, only the right to use them at certain times of the year. Buyers are then stuck in these contracts for eternity. It’s a dystopian version of the American Dream.
That is not Pacaso, Rascoff claims.
Pacaso only buys luxury homes, rather than units in resorts. Most importantly, Rascoff says Pacaso owners can sell their investment to other Pacaso investors or put it in the MLS. Investors can also take advantage of the housing market’s appreciation in home prices, unlike timeshares which generally consist of resort units.
“Pacaso homes actually resell,” said Rascoff.
Rascoff noted that Pacaso has yet to have a single late payment from buyers. He said their users are generally high-net worth individuals.
But Rascoff’s journey to build the next great real estate tech firm has not been without challenges. Some homeowners in the venture’s target wealthy vacation towns, largely in California, don’t like the concept of investment properties. In St Helena, California, Pacaso agreed to a settlement preventing it from expanding in the city.
Rascoff’s co-founder, Allison told CNBC in March, the firm operates in 40 markets and “in only a handful are we misunderstood.”
Allison sold his first company, DotLoop, to Zillow in 2015 for $108 million. Rascoff said Allison possesses the most desired trait of a tech founder: obsession with solving a singular problem. In this case, Allison is dead-set on solving the problems in second home ownership.
“He is the perfect person and was put on earth to create this company,” said Rascoff. “If I said Austin ‘go create this other company,’ he would be terrible at that, but he’s awesome at creating Pacaso.”
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