How Zillow iBuying failure will impact homeowners and shareholders?

At the beginning of November, Zillow announced their exit from the home-flipping business. The company suffers heavy losses and faces multiple lawsuits. 

Three years ago, Zillow opened its iBuying division, Zillow Offers, to purchase homes across the country. The company intended to make minimal repairs on houses and sell them on the open market. Selling to Zillow saved homeowners from paying a 6% commission to a real estate agent.  

The company relied on technology and big data to estimate the value of a property. Zillow’s Zestimate algorithm was unable to accurately predict home prices. As a result, Zillow currently has thousands of homes worth less than the company paid for them. Zillow lost two-thirds of its value and faces backlash from shareholders.

Now, Zillow cancels hundreds of contacts with homeowners after promising to stick with the remaining deals. The company faces two investor-class lawsuits that claim that Zillow made “false or misleading statements.”

Resources:

“Zillow, facing big losses, quits flipping houses and will lay off a quarter of its staff,” by Stephen Gandel (The New York Times, 2021)

“Zillow plunges 25% to lowest since July 2020, after company exits home-buying business,” by Ari Levy (CNBC, 2021)

“Zillow Offers As A Proxy For ‘Big Data’ Shows The Lack Of Qualitative Analysis,” by Jonathan Miller (Miller Samuel Inc., 2021)

“Zillow cancels hundreds more home contracts across the country,” by Angela Gonzales (ABC15, 2021)

“Zillow just stopped flipping homes after scooping up thousands of properties over 3 years. Here's what happened,” by James Rodriguez (Business Insider, 2021)

“These companies will buy your home instantly. Here's what that means for a red-hot real estate market,” by Anna Bahney (CNN Business, 2021)

“Zillow Subject Of Multiple Lawsuits Over iBuying,” by Jesse Williams (RisMedia, 2021)