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:
- 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.
- 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.
- 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:
So you're telling me I could have tricked Zillow into buying my house no questions asked. pic.twitter.com/I1zBfBYPv6
— Khalid 🦃 (@buhakmeh) November 3, 2021
When I saw this on Tiktok I felt so powerless. I thought nobody would listen and that Zillow would gobble up half the houses in the US and nobody could stop them.
I'm so glad they're fucked.
— Daiv (@TheBoves) November 3, 2021
Zillow thought they were the smartest kids in the room https://t.co/jz3VaTcoMn
— 𝗣𝘂𝗻𝗸𝗥𝗼𝗰𝗸 & ᶠᵘᶜᵏ ᵗʰᵃ ᵖᵒˡⁱᶜᵉ (@PunkRockClub) November 3, 2021
Zillow a villain lowkey
— JWET ADDICT 🇭🇹 (@A1_vakabon) November 3, 2021
Stay tuned for what money moves Z makes next. This story isn’t over.