Thu. Jan 13th, 2022

Image for article titled Zillow Ends Home-Flipping Business, Dismisses 25% of Its Employees in Process

Photo: SAUL LOEB / AFP (Getty pictures)

Zillow is coming out of the house-flipping business and will fire a large percentage of its staff, after admitting that it greatly overestimated its ability to quarrel with “the unpredictability of predicting house prices.”

In to say quarterly earnings report released Tuesday, the company announced it would shut down Zillow deals, its department dedicated to house flipping and sales. At the same time, the company announced that it would release a quarter of its employees, or about 2,000 workers. The “Offer” resolution means Zillow is facing a write-down (ie loss) of about $ 540 million, company officials reported.

Zillow has been one of a slew of companies trying to monetize the new “iBuying” trend – the fashion that sees banks, real estate companies and other companies buying houses en masse to take advantage of the United States’ white-hot housing market. The trend that involves giant companies using algorithms and other high-tech tools to bid competitively for properties they do not need was helping to burn up with housing prices soaring and made it in many cases extremely difficult for normal people to buy housing. Often, companies try to acquire houses and then resell them at higher prices to home buyers or convert the houses into rental properties.

Zillow started “iBuying” in 2018 and launched Zillow deals in December 2019. The company once projected that it could earn as much as $ 20 billion a year on the venture, and for the past year or so, it has been on a house-buying campaign to try to reach that goal.

However, the company’s investment has not only does not paid off, but it has come back to bite it extremely hard in the ass. Vice news recently reported that the company’s focus on growth rather than actual profits meant that “Offers” has actually been to lose a lot of money instead of earning them.

The first signs of real problems for the division surfaced about two weeks ago when Zillow reported that it would be stop its home purchase frequency due to supply chain problems and labor shortages. So a week later, it was notified that the company had bought too many houses and wasted money as it was forced to sell them at reduced prices instead of the profits they had hoped for. Now it seems that the wheels have gone completely off, and of course mass redundancies have begun.

“We have found that the unpredictability of housing price forecasts far exceeds what we expected, and continuing to scale Zillow deals would result in excessive earnings and balance sheet volatility,” said Zillow Group co-founder and CEO Rich Barton. “While we were building and learning a huge amount of operating Zillow Offers, it only served 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 problems for buyers and sellers while serving a wider audience. “

Zillow further claims that it will focus on its “core business” – ie. to give consumers a digital place to search for homes instead of trying to sell them directly to them.

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By Victor

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