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Zillow is closing down its iBuyer business, Zillow Offers, after buying too many homes at too-high prices this summer, even as residential real estate markets nation-wide cooled down from their white-hot spring highs.
The move was announced in the company’s third-quarter earnings report. Bloomberg first reported the news.
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” Zillow Group co-founder and CEO Rich Barton said in a statement. “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 effort will take several quarters to complete and the company will cut 25 percent of its staff as a result.
The company said Zillow Offers caused it to lose $304 million in the third quarter by buying homes for higher prices than they will likely resell at. The same problems could cause between $240 million and $265 million in losses in the fourth quarter based on homes it “expects to purchase” during the period, it said, partially due to closings originally scheduled for last that have instead been pushed into this quarter thanks to staffing shortages that kept it from selling homes as fast as it had planned.
Zillow reported $1.7 billion in revenue in the third quarter.
The decision removes one major iBuyer player from the space as other iBuyer services begin to creep into the Northeast, historically a difficult market for iBuyers to access due to its widely varied housing stock.
