Zillow Group will sell around 2,000 homes across 20 markets to an investment firm as the real estate giant begins winding down its home buying business.
The Wall Street Journal reported that New York City-based Pretium Partners will turn the homes into rental units. It paid market price for the homes.
Zillow last week made the surprising announcement to end Zillow Offers, more than three years after making a huge bet on its iBuying business. The move slashed Zillow’s stock and will result in the layoffs of about 2,000 people, or 25% of the company.
Zillow cited its inability to accurately forecast home prices as a primary reason for shutting down the home buying arm.
The Journal reported that Zillow plans to sell 9,800 homes it owns and another 8,200 properties it was buying. It will lose between 5-to-7% on the sales.
iBuying is billed as a way for consumers to sell their home for a lower price but avoid the hassle, time commitment and uncertainty of a traditional sale. iBuyers then “flip” homes and quickly put them back on the market, hoping to make a profit. Other companies in the iBuying business include Offerpad, Opendoor, and Redfin.
Zillow will take a write-down of more than $500 million related to the shutdown of Zillow Offers.
Zillow was pinning its future on Zillow Offers, beyond its bread-and-butter money-maker as a home price estimate platform and lead generator for agents. It originally projected annual revenue of $20 billion by 2024 off 5,000 home sales per month from the home-flipping program.
More coverage:
- Redfin CEO explains how its iBuyer home buying program avoided pitfalls that sunk Zillow Group
- Why the iBuying algorithms failed Zillow, and what it says about the business world’s love affair with AI
- The risk-taking mentality of Zillow’s Rich Barton: ‘It takes just as much energy to swing for the fences as it does to bunt’
- Zillow shares tumble after iBuying fumble: Stock plummets 22%, but not all say the sky is falling
