Citing the pandemic and the resulting short-term freeze of the housing market and subsequent supply/demand imbalance, Zillow Group Inc. announced plans to wind down Zillow Offers, the company’s iBuying service in which Zillow acts as the primary purchaser and seller of homes.
“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,” said Zillow Group co-founder and CEO Rich Barton. “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.”
In an analyst call, Barton also noted that Zillow only converted about 10% of the serious sellers who requested a Zillow offer. The wind-down is expected to take several quarters and will include a reduction of Zillow’s workforce by approximately 25%.
“The most difficult part of this decision is that it will impact many of our colleagues,” Barton said. “This is not something we take lightly. We are grateful for their efforts, and we are committed to providing a smooth transition.”
Included in the company’s third-quarter financial results is a write-down of inventory of approximately $304 million within the Homes segment as a result of purchasing homes in Q3 at higher prices than the company’s current estimates of future selling prices. The company further expects an additional $240 million to $265 million of losses to be recognized in Q4 primarily on homes it expects to purchase in Q4.
