Why Zillow Owns Homes: The Rise and Fall of Zillow Offers (And Why Zillow Was Selling Homes At A Loss)

Ever since online real estate company Zillow launched in 2006, it’s worked hard to transform the industry. In the years since it was founded, Zillow has uprooted the role of the traditional real estate agent, placed greater insights into the hands of the homebuyer, created a profitable portal for renters to pay their landlords, and it even started a referral network for an additional revenue stream.

But one of the most important and news-worthy endeavors the company ever launched was Zillow Offers, the branch of the company that bought and sold homes for a profit. Like so many other Zillow initiatives, Zillow Offers looked promising. But as we learned late last year, Zillow Offers was an absolute financial failure, and Zillow management quickly shut it down. 

Today, we’re taking a deep dive into two important questions: What was Zillow Offers? And why did Zillow own homes in the United States?

Why Did Zillow Buy Homes?

Zillow Offers was designed to be an iBuyer, an online company that specializes in quickly buying homes from consumers, sometimes within 24 hours. 

The biggest iBuyers have enjoyed massive growth in recent years, transforming the real estate industry by purchasing homes directly from eager-to-sell homeowners and even making the real estate agent entirely redundant in certain situations. 

In general, the iBuyer model has proven to be attractive to certain sellers because they offered quick cash for homes—without costly and time-consuming inspections, stagings, and negotiations. This became an especially great outlet for consumers trying to sell blighted property or who were unsure what to do after inheriting a house. 

And Zillow Offers was designed to help Zillow compete directly against two of the biggest iBuyers in the country: Opendoor and Offerpad. 

Like these and other iBuyers, the Zillow Offers business model was to buy a home, then work with nearby contractors to touch up the paint, service the HVAC, check out the roof, and take a look at all of the other essentials. 

And then it would put the home back on the market, selling it for a nice profit.

Unfortunately for Zillow, Zillow Offers was a complete failure.

Why Zillow Sold Homes For A Loss

At some point, Zillow’s modeling broke down. In the company’s pursuit of acquiring as much property as possible, it began offering more than the homes would ultimately be worth on the market. 

Instead of making a quick profit on each home, Zillow gradually began losing money—a consequence of bidding too high, then investing too much, and ultimately selling for too little.

And as the market grew even more unstable and even more unpredictable through the pandemic, Zillow Offers began floundering. 

The problem eventually grew worse than many people could have imagined. In the third quarter of 2021, Zillow Offers lost around $400 million. The loss was enough for the company to completely shut down the entire endeavor, and Zillow even resorted to cutting 25% of its workforce while its stock price dropped 10%.

Are Other Companies Still Competing For Homes In the US?

Zillow Offers may have shuttered after two years on the market, but other companies are still actively pursuing single-family homes around the United States. iBuyers like Opendoor and Offerpad, as we mentioned, are still aggressively buying homes.

But other companies are buying homes as well. These hedge funds and institutional investors are competing directly against consumers (and other companies) to purchase as many properties as possible, allowing them to generate significant profits through real estate and allowing them to control huge swaths of the overall market. 

It’s bad news for families, as these practices directly interfere with their ability to create general wealth for themselves. 

How We’re Fighting Back Against Zillow Offers And Other iBuyers

At New Local Realty, we’re focused on putting the power back into the hands of the individual. By creating new, affordable pathways to rent and buy homes, we’re helping families around Pittsburgh become homeowners—often for the first time. 

With our unique set of resources and multiple decades of experience between our team members, we’re helping the people of Pittsburgh overcome iBuyers and institutional investors throughout our city. 

To learn more, contact us! We’d love to hear from you and explain how New Local Realty can assist you.