MReport December 2021

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4 | M R EP O RT MTECH Zillow Shuts Down iBuying Division AFTER PAUSING OPERATIONS, THE COMPANY DECIDES TO SHUTTER ITS ZILLOW OFFERS INSTANT BUYING BUSINESS. Z illow has announced the closing of its iBuying division, Zillow Offers. The move represents a signifi- cant move away from one of its core means of revenue, and the elimination of approximately 2,000 jobs after the program is completely wound down. Zillow Offers was a service to homeowners to sell without hav- ing to coordinate repairs or host open houses or showings. After buying a home, Zillow prepared it for sale by doing the same type of projects a typical seller would, then lists it on the open market. iBuying created 1% of all U.S. home purchases last quarter for the first time, as homeowners increasingly used these services to sell more than 15,000 homes nationwide. Instant buying, or iBuying, hap- pens when real estate companies use algorithms to evaluate a property's worth based on com- parable market data and purchase houses, directly from the seller, in quick cash transactions. Those companies then quickly list them for sale on the open market after making light repairs and updates. Benefits to the seller include cash offers, flexible move dates, and the convenience of preparing and not showing the home. For those same reasons, iBuyers tend to charge sellers a higher fee than traditional agents. In October, Zillow announced that it was pausing its iBuying program for the rest of the year due to a backlog of houses along with supply chain and labor is- sues, when it came to remodeling and preparing houses it bought for the market. That direction changed when Zillow announced their Q 3 financial results, which included a statement from Zillow CEO Rich Barton on the ending of Zillow Offers citing price forecasting volatility and the huge rise in home prices because of a supply- and-demand imbalance. "We've determined the unpre- dictability in forecasting home prices far exceeds what we an- ticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet Tech Solutions Adding to Efficiency The following companies are leading the way in digital advancements and streamlining processes for ease-of-use and data integrity. volatility," Barton said. "While we built and learned a tremendous amount operating Zillow Offers, it served only a small portion of our customers. Our core business and brand are strong, and we 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." The wind-down is expected to take several quarters and will include a reduction of Zillow's workforce by approximately 25%. "The most difficult part of this decision is that it will impact many of our colleagues," Barton said. "This is not something we take lightly. We are grateful for their efforts, and we are com- mitted to providing a smooth transition." According to Q 3 financial documents, Zillow Offers brought in $1.1 billion in revenue this last quarter—up 534% since last year— compared to $722 million in Q2 which represented more than 60% of the company's total revenue in Q 3. The company purchased 9,680 homes last quarter, but only sold 3,032 homes. The company ended the quarter with 9,790 homes on its books. The homebuying seg- ment posted a loss of $421 million at the end of the quarter. "In our short tenure operat- ing Zillow Offers, we have experienced a series of extraor- dinary events: a global pan- demic, a temporary freezing of the housing market, and then a supply-demand imbalance that led to a rise in home prices at an unprecedented rate," Barton said in a letter to shareholders. "We have been unable to accurately forecast future home prices at different times in both directions by much more than we modeled as possible, with Zillow Offers unit economics swinging approxi- mately 1,200 basis points from Q2 to an expected -500 to -700 basis points in Q 4 2021." "Because of this price forecast- ing volatility, we have had to re- consider what the business might look like at a larger size. We have offered sellers a fair market price from the start of Zillow Offers,

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