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Zillow Is No Longer Buying Homes

Many of you probably don’t know that over the last couple years Zillow has been buying up single family homes across America and paying top dollar for them too. This story really starts in 2018, when Zillow got into what’s called the “iBuying” business. iBuying refers to the process in which deep-pocketed, tech-enabled companies buy up homes directly from the seller, complete light renovations, and then sell them for a very small gain. In real estate terms, they’re a “house flipper,” but on a much grander scale.

At the beginning of 2019, Zillow started to get very serious about swallowing up hundreds of homes in five major cities under their “Zillow Offers” program. By the time the pandemic hit in March of 2020, they’d quickly moved into another dozen cities throughout the U.S.

Many of these homes were being bought at very high prices. One of our clients moved here from out of state and told me, “We sold our home to Zillow for $30,000 more than any other home has ever sold for in our neighborhood.” I couldn’t understand why Zillow would do that, but I certainly couldn’t blame our client for taking Zillow’s money.

This was not the first time I’d heard it too. Many REALTORS® across the nation have been posting stories in private Facebook groups, sharing information similar to this stating that Zillow was paying insanely high prices that made no sense whatsoever. Many of these homes would then come back on the market at even higher prices, but most of them wouldn’t sell and ultimately end up having to drop the asking price well below what they originally paid for the home just a few weeks earlier. It just didn’t make sense. Zillow was losing money on most of the homes they bought.

According to a note to company shareholders in August of this year, Zillow stated it bought 3,805 homes in the second quarter — a record high for the company and more than double the number of homes bought in the first quarter. Then, just this last week, it all came crashing down.

On Tuesday, Zillow announced it would shut down its much-vaunted house-flipping arm “Zillow Offers” and cut its workforce by 25%. Zillow is also seeking to sell some 7,000 homes to institutional investors for $2.8 billion. And it plans to take write-downs of more than $500 million on the failed venture that relied heavily on its pricing algorithms.

Another article stated there are nearly 1,000 homes Zillow recently listed for sale in its five biggest markets, 64% are now being marketed for less than the company paid for them. I have to ask the question: Has Zillow been intentionally manipulating the housing market? It’s hard to say, but as an experienced REALTOR®, none of this makes any sense to me. I’ve worked with many real estate investors over my 16 years in the business and I can assure you, this is not the way to do it!

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