By Owen Ryan, Staff Writer
Zillow, the well-known real estate tech hub, has recently pulled the plug on its house-flipping operations. Back in 2018, Zillow began their iBuying program with a goal of competing with the other large players in the online real estate market like Redfin, Opendoor, and Offerpad.
According to the Wall Street Journal, “Instead of being a company that just charges fees to real estate agents, Zillow wanted to become a sort of digital real estate agent itself, where it would buy and sell homes directly. It’s a technique known as instant buying or iBuying. In the past few years, iBuying has been a big trend among large real estate companies. The goal is to transform how homes are bought and sold.” Using their algorithms and market data, Zillow began to develop “Zestimates” and began making offers.
Zillow’s plan was to purchase homes from motivated sellers before the house even reached the open market. To the world’s surprise, the offers given through Zillow were extremely good, maybe even too generous.
For example, one homeowner in Florida, Karen Dorsett, decided to sell her home directly to Zillow. Karen ended up selling her home to Zillow for $450,000 which was about $10,000 more than what her local realtor told her it was worth. However, despite the high prices paid by Zillow, the company remained optimistic.
“It predicted it could make 20 billion dollars a year in revenue from iBuying, which would be at least 15 times more than the revenue it makes from its core business,” said a recent Wall Street Journal article. With high hopes of money on the horizon, Zillow began facing a plethora of issues.
Mostly due to the labor shortage in the trades, and lack of supply for many essential home-renovation products, Zillow’s hopes for profits began to fade. According to Bloomberg Businessweek, “On Nov. 2 the online property giant shuttered its technology-powered home-flipping business, Zillow Offers; said it was firing 2,000 workers; and began grappling with the damage it had done to one of the most valuable brands in real estate.”
Although Zillow will be shutting down its house-flipping operations, it will continue to act as an online real estate resource for investors, homeowners, and renters. With the housing market continuing to rise, it will be interesting to see what happens next.
