When a lower middle class guy in your town does this, he’s called a scalper and seen as a villain.
When rich elites do this with life essentials, they’re market makers doing a useful service.
If the spread is a large percentage of the assets value then it doesn't work as well and public perception is more negative. The housing market is much more difficult to properly become a market maker in because the transaction costs are high. The seller's realtor is going to want their >=3% commission. There's other costs like title transfer fee/cost, inspections, etc.
Also scalping is typically more of product's that are impossible to otherwise obtain and are sold at a huge premium.
I think Zillow frequently tried to make the seller cover these costs (whether directly or via a lower offer amount) but it seems they didn't do this successfully. It's also possible that the seller's who accepted Zillow's offer tended to have some X factor that would make their house more difficult to sell but properly handling every possible X factor is very difficult.
If Alice has season tickets to a basketball team, and Bob buys some of them to scalp later, isn’t he adding liquidity?
I know nothing.
But the whole point is that the entertainer doesn't want liquidity, they want illiquidity, for two reasons:
1. The marketing value of a ticket being impossible to obtain. The best way to do this is to sell the ticket below the market clearing price. Then you get rows of people sleeping before the day they go on sale, etc. A lot of people want that image as they believe long term the marketing will generate more revenue.
2. They want fanatical fans rather than rich fans. They may feed off the worship or cheering and want those who go through a lot of hoops to get the tickets, rather than a salesman using the company expense account to wine some client who might not throw their bras on the stage or paint their face green and scream for their team. In this sense, you can think of the money the entertainer gives up by selling below market as the purchase price of audience enthusiasm.
Now if the scalper steps in, and instead of having the underwear tosser you get the businessman, then many entertainers/performers would be pretty upset as the scalper took for themselves the enthusiasm payment and left the entertainer with the market-rate fans.
Scalpers always buy stuff where there is already high organic demand from actual end users, because scalping only works if demand outstrips supply. This demand is the liquidity the producer of the stuff needs, and it's already sufficient for them to sell all their inventory quickly, so the scalper obviously does not provide any useful service to the producer.
For the buyers, they act as a seller, but for each item they offer, the original producer has one less to offer, as the scalper has bought it from the original producer. Therefore, they provide exactly no additional liquidity for the end user.
The only thing they do is ratchet up prices and reduce customer service levels (the original producer or an actual, professional reseller will most likely offer better customer services than some random guy on eBay), which are both net negatives for everyone but the scalper.
