Zillow exits digital home-flipping operation due to mounting losses

Digital real estate company Zillow is pulling the plug on its digital home-flipping operation called Zillow Offers, a unit which caused the company to lose more than $380M, according to a third-quarter earnings report.

Why should we care?
Zillow, which competes with Opendoor through its Zillow Offers service, said its pricing algorithms weren’t accurate. In recent months, the company’s algorithms caused it to overpay for homes as the U.S. real estate market was cooling. As a result, Zillow listed properties at a loss. “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated,” Zillow CEO Rich Barton said in a statement. “Continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.” Zillow has had a tough few weeks, but while home flipping was Zillow’s biggest source of revenue, it hadn’t turned a profit. Zillow had big plans for its home-flipping business, aiming to buy 5,000 homes a month by 2024. On October 18, Zillow announced that it could no longer make any new offers on homes because labor and supply shortages weren’t allowing the company to fix up homes quickly enough. The company is cutting its workforce by 25%.