If someone as stupid as Zillow demonstrated themselves to be was willing to spend $50k over asking, they can sell at $25k below their own purchase price and it's a loss. The price still remains higher than it ever should have been.
Is there some mystical oracle of house prices? Or, like all markets, are things priced according to what buyers will pay intersected with what sellers will sell for?
The price "should have been" whatever a homeowner could get for selling his house. It was his asset to do with as he pleases. It is not the asset of a whiny buyer to cry about not getting the price he wanted, especially at a cost to the seller.
Also Zillow bought a small fraction of all house sales, so paid market rates. They weren't paying 50k more for a house than a neighboring house sold to a person for. The evidence you imply isn't there. Zillow and individuals were paying the same rates, i.e., what the market would bear, i.e., the actual price.
Buying for over asking price is done all the time. I take it you know little about housing markets, sales, or any of this.
I've been involved in 6 house transactions in the past 2 years (a good friend is a realtor, 2 of the transactions involved properties I was moving, 2 were friends, 2 were relatives.) 5 moves f the 6 went for more than asking by quite a bit, for the exact reason that the realtor, wisely, knew the market prices and put them up decently below rates. This causes a rush of buyers who then start a bidding war. All were private buyers. This is standard practice.
