PHOENIX (3TV/CBS 5) -- Zillow has decided to stop buying homes and flipping them for resale. This comes as the company says they are unable to predict housing prices accurately.
Zillow is known as a place to check houses for sale in your area, but people have been able to sell their homes to the company for the past two years. That will no longer be an option. The company reported a third-quarter net loss of over $328 million alone, all related to its home buying unit. Now Zillow has decided to go back to its roots.
“Ultimately, I think this was a great test for them, and now they’ll hopefully go back to their roots of what got them to where they are today, which is easy access of knowledge and information,” Phoenix realtor and CEO of The Karas Group Chris Karas said. “There is only so much information you can get from an algorithm and robot versus human interaction,” Karas said.
The company's homebuying business, called Zillow Offers, started a couple years ago allowing homeowners to sell on Zillow for cash rather than going through a broker and dealing with a closing process. After purchasing a home, Zillow would invest in repairs and maintenance and try to sell it at a profit. But during the pandemic, workers were harder to find, and the cost of supplies grew tremendously, and Zillow found itself struggling. The company is now backing out of the buying and selling business, saying they made this decision because they are unable to predict housing prices accurately.
“I commend them 100 percent for trying something new,” Karas said. Arizona housing market should not feel an impact. According to Karas, in the 25 markets the company was doing business, Zillow had less than one percent market share. Karas added that some people are willing to take less because of the convenience factor companies like Zillow, Offerpad and Opendoor provide, but he says traditional buying and selling is going to be your best bet.
“At the end of the day, real estate was built on interaction between two individuals and really hiring that area expert and someone that specializes and is an expert in that area,” Karas said.
In a statement, Zillow said they are still closing on the homes they are under contract for and prepping them for sale. They will then put them back on the open market. Because of this change, Zillow will lay off a quarter of the real estate firm’s employees, or about 2,000 employees. The company said 24 of those laid off will be from its Scottsdale office.