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REX Homes has second round of layoffs, closes NY and CHI markets, plans to join MLSs

(CORPORATE) REX Homes has just concluded a second round of layoffs and has indicated they will be joining MLSs as part of their restructure.

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REX Homes yesterday initiated a second round of layoffs in the past two months, has now shut down operations in Chicago and all of New York as part of a company restructuring, and intends on testing out joining local MLSs.

Layoffs are a common part of startup life, and REX Co-Founder, President, and COO, Lynley Sides assured remaining employees in a company-wide call that they are “done with downsizing efforts,” which they say they did their best to do “respectfully,” and the new goal is to move forward, focusing on the customer experience, on profitable markets, and on “winning” now that the company has “the right plan.”

The first round of layoffs was in late August and eliminated roughly 60 positions (a number which has not yet been verified by REX). No severance was paid, but the company offered resume coaching and allowed impacted staff to retain all company technology as a “creative” move, Sides said on the call.

The company has earned several rounds of private equity funding and is not publicly traded. They had not closed their Series D round of funding in August, but did shortly thereafter.

The second round of layoffs was Thursday, October 7th and impacted 34 employees who did receive severance and were also allowed to keep company technology.

Because of the timing of the Series D closing, Sides told staff on the call that they would be revisiting severance with employees cut in the first round.

She also noted that they would have preferred one round of layoffs and had hoped that would suffice, but instead took measures to cut “all costs,” including reducing marketing spends “notably,” addressing overhead, negotiating with vendors, and even subleasing some of their space to “reduce the impact of the second wave.”

It is unclear what markets they continue to serve as their website still allows users to select New York, but not Chicago, and several past and current staff say the number of areas they service have been drastically reduced in this calendar year but none agree on the actual number. Sides noted a shift toward focusing exclusively on the most profitable markets.

Sides also said on the call that REX would be “trying to join a few MLSs which is the right thing to do for our business and our customers” as they focus on the “customer experience.”

The pilot test is notable given the company’s lawsuit against NAR and Zillow, alleging a cartel surrounding MLSs and commission structures. Although a recent court ruling urged the company to not use the term ‘cartel,” the lawsuit stands.

Also fascinating is that the real estate tech startup was able to avoid all news coverage of the layoffs, market closings, or a shift toward joining any MLS.

Regardless, Sides concluded her portion of the call by assuring her teams that she remains “incredibly optimistic about REX’s future,” a sentiment others on the call echoed.

We have reached out to REX Homes for comment, as we don’t know the precise number of employees dismissed in August, the size or date of their Series D round of funding, or what markets they still serve.

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Real Estate Corporate

Zillow seeks a patent to fill out forms electronically – sounds familiar…

(TECHNOLOGY) In yet another broad patent application, Zillow is aiming for ownership of the ability to fill out “transactional documents” electronically.

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In yet another obscenely broad patent application, Zillow is aiming for ownership of the ability to fill out “transactional documents” electronically.

The official patent application describes “generating electronic transactional documents using a form generating system” and “using a design tool that allows a user to place data entry fields over an image or snapshot of a transactional document.”

If that sounds familiar, it’s because virtually every website that allows customers to e-sign anything already does this. Some concerns also address the fact that services such as DocuSign – a service in which both Google and NAR invested – and even Google Forms might fall under this category.

Should Zillow see this patent approved, it could spell disaster for a huge operational segment of any real estate sale: the actual signing of a contract.

What’s odd about this patent application is the bizarre, gaslighting-lite language it uses to pitch the idea of something that is already used widely on the internet. In the background section, the patent claims that “Most of the time the parties are not in the same physical location when the offers, counteroffers, and acceptances are signed. Fax machines are often used to facilitate the process, as well as emailing scanned documents.”

The background continues with, “Sellers, buyers, and their agents are often not in the same contemporaneous physical location. Therefore, signed documents are often faxed between parties, with original signed copies being retained for the closing.”

Using the implied inconvenience of a physical fax machine as an argument for the efficacy of electronic documents makes sense, albeit in an obvious kind of way; however, using this argument to support the notion that Zillow should be able to claim a patent that gives them domain overall electronic forms in the real estate microcosm seems particularly villainous.

It’s also worth noting that, should this patent be granted any time soon, the likelihood that the world will still be in the grips of the COVID-19 pandemic is high. From the patent office’s standpoint, restricting the remote signature options of any real estate firm not affiliated with Zillow during a period of time in which purchasing property is already laborious and dangerous shouldn’t even be an option.

Time will tell whether or not Zillow is successful in achieving its bid for e-signing. Other document-signing services may be able to dispute the patent, but Zillow’s history of scooping up unlikely patents is undoubtedly on their side.

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Real Estate Corporate

Zillow hit with another lawsuit after iBuying collapse, claiming they misled investors

(REAL ESTATE) Stockholders are suing, alleging that Zillow publicly praised the iBuying program despite knowing it was dying, and they claim to “suffer significant damages.”

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Zillow Group was hit late Thursday with yet another investor lawsuit on the heels of the collapse of their iBuying program (“Zillow Offers”). Hillier v. Zillow Group, Inc. et al in the Western Washington District Court is seeking class action status in this federal securities lawsuit, alleging that Zillow failed to disclose to investors that they did not have the ability to price homes for their Zillow Offers program, and that paired with a known supply and labor shortage, led to an inventory backlog.

The suit claims that under these conditions, Zillow (ZG) knew they would have to end the iBuying program, which would hurt their bottom line, something investors were not made aware of. In fact, this suit notes that company leadership continued to speak positively in public, making “materially false and/or misleading statements” about the program despite their overpaying for numerous homes and selling them at a loss.

In the Notice of Related Cases filed, Braua v. Zillow Group, Inc., et al., and Silverberg v. Zillow Group Inc., et al. were cited, both of which are seeking damages for allegations of misleading investors. The Hillier suit is specifically seeking to certify a class of Zillow stock buyers who made purchases from Aug. 7, 2020, and Nov. 2, 2021.

The new lawsuit outlines the following (our words, not theirs):

  • Zillow launched the home buying program in 2018 to rapidly flip properties.
  • By close of 2019, they were in 22 markets, and the program accounted for half of their annual revenue ($1.4B).
  • On August 05, 2021, the company released Q2 earnings, citing $772M from the iBuying program, roughly 60% of their annual revenue. In the release, Defendant Rich Barton said that their “iBuying business, Zillow Offers, continues to accelerate as we offer more customers a fast, fair, flexible and convenient way to move” and “is proving attractive to sellers even in this sizzling-hot seller’s market.”
  • In October, RBC Capital Markets began cooling on Zillow, lowering their price target for the stock, warning that Zillow Offers would likely miss quarterly expectations, dragging ZG down from $91.40 on October 01 to $85.68 on October 04.
  • Shortly thereafter, in October 2021, Zillow announced they would be halting the program through year’s end, and stocks continued to slip.
  • In November, the company released their Q3 financials and simultaneously declared an end to the program and a 25% workforce cut.

It appears that the crux of the Hillier case is that leadership continued to praise the program even as it declined, right up until the Q3 earnings statements went public and it could no longer sustain the program.

“As a result of defendants’ wrongful acts and omissions, and the resulting declines in the market value of the company’s securities, plaintiff and other members of the class have suffered significant damages,” the suit concludes.

As recently as this week, InvestorPlace said, “it’s going to be a while before ZG stock could make a comeback,” noting that Zillow’s house is not in order.

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Real Estate Corporate

Zillow nixes iBuying program and cuts 25% of staff, consumers go wild

(REAL ESTATE) After Zillow hit pause on their iBuying program, they’ve now cut it altogether and laid off staff. Can Zillow haters gloat yet? Maybe not…

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Zillow landing page on laptop

Today, Zillow Group announced their plan to shut down the Zillow Offers program (known as their iBuying initiative), also announcing a cut in their workforce of roughly 25%.

With a backlog of over 9,800 homes (several thousand more than they reported just days ago) that need to be sold, and a current 8,200 under contract that they’re still moving forward with purchasing, the company can’t simply cite labor and raw materials challenges.

The rapid escalation of the program in the past quarter is part of the subsequent sunsetting wherein they’ll be eating a $304 million in losses, and another $240-$265 million expected additional losses on pending properties.

They’ve instantly become famous for using their algorithm to wildly overpay on a ton of product, then losing their shirts for it.

Zillow Co-Founder and former CEO said earlier this week that he assumed purchasing would resume in Q1, but fellow Co-Founder and current CEO, Rich Barton stated, “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.”

Barton added, “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.”

This combination of conditions has plenty of real estate professionals (that have long hated Zillow) gloating on social media.

We recently urged our readers to not get excited about their last announcement that they’d be pausing the iBuying program, and we stand by that today for several reasons:

  1. Fully 25% of their workforce got a pink slip today and that is nothing to celebrate – they’re people whose lives were just upended. But not Rich Barton’s, he’ll be just fine.
  2. This program is one of many for them and these losses don’t matter much in the bigger picture – it was a very small piece of their pie.
  3. Even if Zillow stopped getting every listings feed on the planet and every Realtor stopped giving them their money, they’ve created a scenario where they’ve applied for (and been granted by the federal government) nearly every conceivable generic patent on real estate online. Their evil genius will help leadership to survive any storm, like it or not.

Does the shutdown of this program spell doom for the iBuying model in general? It could be seen that way, or it could be seen that they moved far to quickly, or simply that economic conditions collided to make the perfect storm which wasn’t in their favor.

Either way, from our vantage point, the program has always felt like they were playing with Monopoly money, or like they were enjoying being WSB bros, and it’s now over and a lot of people are out of work today.

What will always remain consistent is real estate practitioners reminding each other that they’re who have fed the beast since day one, like this Realtor:

The only real downside for Zillow is the public relations hit they’re taking with consumers who are going wild about the news:

Stay tuned for what money moves Z makes next. This story isn’t over.

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