Zillow Gets Out of the House Flipping Business

Hello Hampton Roads,

Usually when people think of flipping homes, visions of HGTV come to mind, where homes are bought, made picture pretty, and sold for a profit. Sounds glamorous right?  Well, all that glitters is not always gold, and Zillow learned this the hard way. Check out Zillow CEO, Rich Barton's interview with CNBC as to what happened to their iBuyer Program:

Over the past three years Zillow implemented an iBuyer program in different parts of the country where they would make sellers instant cash offers, with fast closing times, without the hassle of doing repairs and selling homes the traditional way. Normally in an appreciating market this is a valid strategy, but it's extremely risky when you OVER PAY.  When you are buying a home as an investment to sell in a short period of time, the money is made when you buy. The right buy price gives you a cushion for profitability (the less you pay, the bigger the cushion) and when you find the market is moving against you due to supply chain delays, labor shortages and rising costs then you taper your buying.  

According to a Wired Magazine's article onin Zillow's iBuyer Program, while Zillow iBuyer competitors (like Open Door, Redfin and Offer Pad) slowed down their buying in October, Zillow did not and bought homes in September for $65,000.00 more ithan the average market price. The article further states that in Phoenix, 9 out of 10 homes were listed for sale at a price lower than what  Zillow paid and that if each of these homes sold for the asking price, Zillow would lose $6.3 million dollars.  

Zillow-owned homes and pricing history can be found on their website. While many homes are being sold at a loss, those that are priced higher are not significantly higher than what Zillow paid. While Zillow is no longer purchasing homes, it has an inventory of 7,000 homes that it intends to sell to institutional investors for $2.8 billion.

The market extremes we've been seeing never last and Zillow's exit from the home buying business is evidence of this shift. In Hampton Roads, while we are still in a strong seller's market, it's not as strong as it was and I am seeing increasing days on market and higher absorption rates. As always, if you are thinking of selling or buying a home please contact me and I am happy to advise you on the current state of the market and get you started on the process. 

Thanks for Reading,


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