Zillows Homebuying Program

Zillows Homebuying Program DOOMED

News of Zillow Homebuying Program went belly-up elicited no small amount ofย internet schadenfreude.ย 

Launched in 2018, the home-flipping programโ€”part of the so-called iBuyer movementโ€”felt like more tech utopian snake oil in a culture thatโ€™s already drowning in it: The all-knowing algorithm can create an Uber for selling your biggest asset. 

It proved to be a spectacular failure. 

On Tuesday, the Seattle-based company announced the demise of its $1.17 billion division, setting off a 25% stock nose-dive and a 25% slashing of the Zillow workforce. (Wall Street ghouls BlackRock, JPMorgan Chase, and Goldman Sachs, all of whom are ramping up purchases of residential housing stock, are certainly paying attention.) After pausing the program at the onset of COVID, Zillow resumed gobbling up homes this year, no doubt contributing to the chaotic spring market, though total iBuyer purchases account for just over 1% of Twin Cities home sales.

โ€œZillows buyering program, like other iBuyers, are just house flippers with nice websites,โ€ says real estate agent Nate Pentz ofย Pentz Homes. Fundamentally, he says, theyโ€™re no different than the flippers who advertise CASH 4 HOMES via highway offramp signs; for the margins to work, the properties need to be undervalued enough to support significant repair costsโ€”ideally foreclosures and short sales. โ€œZillow had so much money to burn they didnโ€™t see a cooling market,โ€ Pentz says, noting that his agents saw bids from Zillow Offers that soared $30,000 over the comps they studied.ย ย 

The hungry, hungry Zillow bots overpaid.

Locally, the Zillows homebuying program fallout is two fold: The remaining 167 homes that Zillow owns and needs to unload, plus the fortunes of the manโ€”Kris Lindahlโ€”who landed the exclusive contract to sell โ€˜em.ย 

The prices of those properties, which you can browse here, demonstrate the losses Zillow continues to endure. Zillow bought this 4-bedroom, 4-bathroom New Hope home for $364,800 in April, according to county records; itโ€™s listed for $320,000. This south Minneapolis bungalow was snatched up for $368,900 in July; itโ€™s now going for $325,000. This north Minneapolis rambler was acquired for $267,300 in August; you can have it for $240,000. Nationwide, Zillow has to rid itself of 7,000 properties

The demise of Zillow Offers doesnโ€™t worry Lindahl. โ€œThe Zillow Offers partnership accounted for a small portion of our business,โ€ he says, adding that it was โ€œan honorโ€ to be chosen as the local partner. Lindahlโ€™s trademark Guaranteed Offer programโ€”perhaps youโ€™ve noticed the billboardsโ€”operates on similar principles, but itโ€™s โ€œthriving,โ€ he says. 

โ€œIn fact,โ€ the omnipresent real estate agent says, โ€œwe are increasing our marketing for that program.โ€ 

Look out for more billboards.

Properties from Zillow
Mountaineers Team

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