Zillow Surprisingly Closed Its Homebuying Program Last Year
One of the biggest stories in 2021 real estate occurred when Zillow surprisingly closed its homebuying program last year. Prior to this, Zillow established itself as one of many large property investors across the United States.
Zillow grew notorious for gobbling up single-family homes, spiking home valuations, and introducing additional obstacles for potential homeowner. A big component of this stemmed from Zillow’s “Zillow Offers” program. The program tasked prospective home purchasers. However, after a third-quarter report showed missed revenue and earnings goals, Zillow pulled the plug.
Zillow Surprisingly Closed Its “Zillow Offers” Program
In 2019, Zillow launched “Zillow Offers”. This program allowed homeowners to quickly sell their home to Zillow for cash without worrying about closing costs. In addition, Zillow Offers avoided long waiting periods and last-minute home repairs prior to the sale. Rather than increase profits, this practice turned out to be a large hit for the company.
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated,” Zillow CEO Rich Barton said. “Continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”
Why Did it Fail?
In simple terms, Zillow Offers lost the company $381 million in the most recent quarter. This catastrophic loss plummeted Zillow stock prices. The company misread the market and oversold what they hoped would be quick growth in housing prices. Thus, Zillow surprisingly closed its homebuying program.
The Windfall After Zillow Surprisingly Closed Its Homebuying Program
The poor earnings report presents several ripple effects. Not only did Zillow surprisingly close its home program, “Zillow Offers”, it also will see a 25% workforce cutback. 25% of Zillow’s workforce shakes out to roughly 2,000 employees. Also, Zillow plans to sell its stock of purchased homes. In total, Zillow intends to sell approximately 7,000 homes as it unloads its built-up portfolio, though Barton says they are in no hurry.
“We’re not in any kind of fire sale. We’ll wind down the inventory in an orderly way,” he said.
In the United States real estate market, Zillow represents one of many large investors buying up available single-family homes. This hot-button issue may provide an interesting look into what the future of that practice may bring.
To learn more about why Zillow surprisingly closed its homebuying program last year, get in touch with the real estate attorney at Lee Scott Perres, P.C.
