At this point, you’ve probably heard about Zillow’s iBuying division, also known as Zillow Offers. If you haven’t heard Zillow was flipping homes under this branch of their business. Something they’ve decided to hit the pause button on indefinitely, causing them to lay off a quarter of their workforce. This endeavor going sideways has caused their CEO, Rich Barton, to come out on the defensive. Barton released a statement that the unpredictability of forecasting home prices, often seen as their core value to homeowners since their start in 2004, far exceeded their expectations, but that their “core business and brand remain strong”. Their highest office saying the quiet part out loud has thrown their business for a loop, read as stock market unpredictability, with the company’s shares dropping 8.6%this Monday.
Zestimates were the reason anyone really knew about Zillow at its inception. Everyone wanted to know if their home was now estimated at a higher rate, or value, than when it was purchased. Barton also stated that they “remain committed to creating an integrated and digital real estate transaction that solves the pain points of buyers and sellers while serving a wider audience.” They’ve said winding down their business and assessing the impact to staff and the company will take several quarters. The staff will, or have felt their changes, or dismissals, almost immediately. The core business referenced above, which is “providing a place to browse houses for sale and provide pricing estimates” is on a balance. How could the biggest player in the business of estimation have mis-forecast this badly? Are their “estimates”, or home value forecasts, also being called into question? Maybe they should be. As the company is standing to lose a total of $550 million on Zillow Offers, they’re looking to sell quickly to institutional investors for $2.8 billion. In some markets, they’re selling their flipped fixer-uppers for less than what they purchased them. One insider’s observation was that Zillow can likely sell to single-family landlords at a profit because that’s a market currently starved for inventory, which is seemingly unlikely with what seems like their look to investors, mentioned above, but seems like a solid solution to this Zillow saga.
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