Digital real estate platform Zillow is taking a step back from its home acquisition strategy due to an overabundance of housing inventory and is now referring sellers to its local Premier Agent partners, according to multiple media reports.
“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” Jeremy Wacksman, Zillow’s chief operating officer, said in a statement. “We have not been exempt from these market and capacity issues, and we now have an operational backlog for renovations and closings.”
Zillow maintains a digital portfolio of real estate listings online and on its smartphone app. Its residential brokerage subsidiary iBuyer was introduced in 2018 and offered an instant home-buying program that purchased houses from sellers sight unseen and without a formal listing.
Although Zillow didn’t look at the properties it intended to purchase, the company had each house professionally inspected for extensive repairs. Following the purchase, Zillow hired contractors to do minor renovations, like replacing carpeting and painting the inside.
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Zillow’s main rival, Opendoor, said it’s having no problem keeping up with inventory or demand and is continuing to “scale and grow.” Opendoor works across 44 markets, including all but two of Zillow’s 25 markets.
In the second quarter of this year, Zillow purchased 3,805 houses and said it will close deals under contract and continue to market and sell homes from new acquisitions. Opendoor bought 8,494 homes during the same time frame.
Rival Offerpad Solutions posted a contribution profit per home sold that was more than 4.7 times Zillow’s in 2020, according to BTIG Research.
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Zillow said it doesn’t know when it will re-institute the iBuyer program, but it plans to do so but probably not before the end of this year. The company pulled the program at the start of the pandemic, as did Opendoor.
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