Friday, December 17, 2021 / by Ryan Nager
Here’s why Zillow had to cancel all of their iBuyer operations.
One of the biggest iBuyers in Phoenix has completely ceased operations. That's right; it’s Zillow Offers, the same company I was talking about two months ago. But why did they fail? Let’s start with some backstory.
Zillow Offers started in about 2018, trying to compete with other iBuyers for the market. They were buying at a sustainable rate, but, over the summer, Zillow and other iBuyers started buying everything they could. Zillow came out recently and said they were losing so much money that they had to completely stop operations.
"It’ll be interesting to see where Zillow goes from here."
In Q2, Zillow lost $400 million on their iBuyer program, but what about the other companies? In my opinion, Zillow was making the most egregious offers out there, buying homes for way more than they were worth. Zillow had to sell 91% of the Phoenix homes they bought at or below what they paid for them. It’s hard to make money in that situation.
Some people thought that Zillow knew something the rest of us didn’t, but it’s clear it was the opposite. They didn’t have the contractors, service people, or local expertise to purchase homes for the right price.
What does this mean for everyone else? Nothing really. Zillow is selling their homes to an institutional investor, so they’re not even going back on the market. It’ll be interesting to see where they go from here, though. They’ve lost a lot of agent and consumer confidence.
I’m always going to stay ahead of things and let you know what's going on with different institutional buyers. If you have any questions about the news with Zillow, investing, or real estate in general, I’m always here to help. Just give me a call.