Is Zillow’s Flipping Business Flopped?

Zillow has announced their departure from the iBuying business model. What does this mean for Zillow & the real estate market?


Introduction: Greetings, it’s Parker McKee, and recent news regarding Zillow’s decision to discontinue their iBuying business has sparked intrigue and raised questions about its implications. As a leading online platform for home searches and estimates, Zillow’s pivot away from iBuying is a significant development. In this blog post, we’ll dive into the details surrounding Zillow’s decision, its impact on the real estate market, and the importance of consulting local real estate experts for accurate home valuations.

Zillow’s Departure from iBuying: For those unfamiliar with the term, iBuying refers to the practice of buying properties with the intention of reselling them for profit. Zillow’s decision to exit this venture stems from challenges in sourcing contractors and materials needed to prepare acquired properties for sale. As a result, they plan to sell approximately 7,000 homes and reduce their workforce by around 2,000 employees, representing about 25% of their staff. Reports indicate potential losses exceeding $500 million, with an average loss of $80,000 per home listed after purchase.

Impact on Zillow and the Real Estate Market: Zillow’s exit from the iBuying business has undoubtedly had a significant impact on the company itself. Their stock value has experienced substantial declines, and they are facing lawsuits from investors. However, in terms of the overall real estate market, the effect is expected to be minimal. While Zillow’s sale of 7,000 homes seems significant, it represents only a fraction of the millions of homes sold annually in the United States. Therefore, the market as a whole is unlikely to be significantly impacted.

The Inaccuracy of Zestimates: A key takeaway from this situation is the importance of recognizing the limitations of Zillow’s Zestimate feature, which provides homeowners with estimated property values. Although Zestimates can offer a general idea of a property’s value, they often lack accuracy due to their algorithmic nature. Zillow’s CEO himself acknowledged the challenge of predicting home prices accurately. Consequently, relying solely on Zestimates may not provide an accurate representation of a home’s true value.

The Role of Local Real Estate Experts: To obtain reliable and precise assessments of your home’s value, it is crucial to seek guidance from local real estate experts, such as agents. These professionals possess a deep understanding of the local market, stay up-to-date with current trends, and grasp the unique dynamics of specific neighborhoods. Unlike Zillow, which operates on a national scale, local experts have firsthand experience with the properties and can offer personalized insights tailored to your specific area.

Consulting with a real estate agent who has comprehensive knowledge of your local market is vital. They can provide accurate valuations based on their expertise and an intimate understanding of the intricacies that differentiate your property from others in the area. By relying on these local experts, you can make more informed decisions regarding your home’s value.

Conclusion: While Zillow’s decision to exit the iBuying business has had substantial ramifications for the company itself, the overall impact on the real estate market is expected to be minimal. Homeowners should be cautious when relying solely on Zillow’s automated Zestimates and instead consult with local real estate experts for accurate valuations. If you are curious about your home’s value or have any real estate-related inquiries, reach out to me today. I am here to provide personalized guidance and insights based on your specific market conditions.