Huge news came from Zillow this week. They recently announced they would no longer have their Zillow Offers program. They have worked on this project for the last four years, and it was something they said would change the industry. Through this program, Zillow was buying houses from sellers, then selling them. This pillar of the Zillow business model was suddenly halted, and they will no longer be buying homes. Tom Nickley breaks down this news and why it’s important to buyers, sellers, and agents.
Watch Tom Nickley’s full video here:
What’s happening with Zillow?
A few weeks ago, Zillow announced they would temporarily stop buying houses for the remainder of the year due to supply & demand and labor shortages. There was plenty of speculation about their reasoning; however, a few days later, a report came out saying,
“Based on 1,000 homes that Zillow had listed, 63% of those homes were listed below the price point that Zillow had purchased.”
On top of that, it was then reported that Zillow was trying to offload 7,000 homes they had purchased for $2.8 billion. They were trying to shop these homes to big institutional investors that would buy those homes for rentals. And soon after, Rich Barton, the CEO of Zillow, announced that Zillow would no longer have their Zillow Offers program and ultimately exiting the iBuying (instant buyer) space.
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” he added, “scaling Zillow offers would require too much equity in capital, and it was beyond the tolerance level of what they were comfortable with moving forward.” – Rich Barton, 2021
Zillow is an online real estate portal and a dominant marketing company, which built its following on consumer experience and lead generation. They have an excellent premiere agent program, which The Nickley Group has invested. All of this has been what they have excelled at, but a few years ago, they decided to get into buying homes. Other businesses like Opendoor and Offerpad have been using the iBuyer method for a few years, causing Zillow to feel the need to compete with these other companies.
What was Zillow doing in the iBuyer Realm?
While it was surprising to hear the news, it wasn’t shocking. Over the last several months, our team and other professionals talked about how crazy it was. For those that don’t know, Zillow was making offers on homes based on an algorithm. The algorithm predicted where home prices were going, based on all sorts of data points to determine how much they should buy a home for.
The algorithm was running wild, and they were making crazy offers on homes. Our team was running comps for our sellers, and Zillow offered $75,000-100,000 more than what we predicted we would be able to sell the home. This is something we have been mindblown about for the last few months. We didn’t understand how this could be sustainable. Fast forward six months later, and Rich Barton has conceded that the algorithm was not working with this market.
Since the pandemic started in 2020, we have seen significant shifts in the market. Being able to be here locally, with his finger on the pulse, studying the market, and doing tons of business in this market, Tom has seen a very locally specific market.
The Great News!
This is excellent news for the industry, Zillow, and the consumers. While there is a space for iBuyers, and it makes sense for some sellers. Zillow is an internet and marketing behemoth, and they started working in a world that was the exact opposite of that. Zillow continues on its path of being an excellent resource for consumers, great client experience, and engaging platform. Letting Zillow and real estate agents coexist brings a lot of value to the consumer.
The Importance of an Agent.
We genuinely believe that when deciding to make a move, it’s imperative to utilize an experienced agent who knows your local market. The agents at The Nickley Group work in real estate full time. We live and breathe real estate. We are constantly staying up-to-date on the local trends and able to answer any questions thoughtfully.
If you have any questions about what happened with Zillow or the local market, please reach out to us at 407-906-2456 or send us an email at info@thenickleygroup.com. We look forward to speaking with you!