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Zillows Homebuying Program DOOMED
News of Zillow Homebuying Program went belly-up elicited no small amount ofΒ internet schadenfreude.Β
Launched in 2018, the home-flipping programβpart of the so-called iBuyer movementβfelt like more tech utopian snake oil in a culture thatβs 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.
βZillows buyering program, like other iBuyers, are just house flippers with nice websites,β says real estate agent Nate Pentz ofΒ Pentz Homes. Fundamentally, he says, theyβre 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 costsβideally foreclosures and short sales. βZillow had so much money to burn they didnβt see a cooling market,β Pentz says, noting that his agents saw bids from Zillow Offers that soared $30,000 over the comps they studied.Β Β
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 manβKris Lindahlβwho landed the exclusive contract to sell βem.Β
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; itβs listed for $320,000. This south Minneapolis bungalow was snatched up for $368,900 in July; itβs 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 doesnβt worry Lindahl. βThe Zillow Offers partnership accounted for a small portion of our business,β he says, adding that it was βan honorβ to be chosen as the local partner. Lindahlβs trademark Guaranteed Offer programβperhaps youβve noticed the billboardsβoperates on similar principles, but itβs βthriving,β he says.
βIn fact,β the omnipresent real estate agent says, βwe are increasing our marketing for that program.β
Look out for more billboards.
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