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It’s a pretty big deal when Zillow Stops Buying Homes. What does this mean and where will sellers go from here?

Recently Zillow made an abrupt announcement that it would no longer be buying homes through its Zillow Offers program. Does this mean things are getting rough in the real estate industry?

What Is Zillow Offers?

Zillow Offers wasn’t a unique program, but it was popular at times. Launched in 2019, the program had the company buying homes directly from sellers, which allowed those sellers to offload their properties as-is, without completing repairs or having to arrange showings. Then Zillow would handle all of the necessary upgrades and fixes and list the homes for sale. 

Other iBuyers like Redfin’s RedfinNow, OfferPad, and OpenDoor similarly purchase homes from sellers to resell on their own platforms, but none of these services have halted buying properties like Zillow, in fact they ramped up efforts after Zillow’s announcement.

Why Did Zillow Offers end and Zillow Stops Buying Homes?

Zillow claimed that market capacity issues and operational backlogs were to blame for their operational stop — or perhaps it’s a pause — Zillow was unclear about this. 

No doubt the rising prices of homes, increased demand for limited supply, as well as the increased cost of renovation inputs like lumber and paint, and the shortage of construction work labor were factors in the decision. 

What’s also true is that home flipping isn’t as lucrative as it may have once been. The first and most simple explanation is that home prices are elevated, so it is harder to make a large margin of profit. The past year (plus) has seen home prices skyrocket both due to high demand and inventory shortages, and investors — including iBuyers like Zillow — aren’t able to make as much profit from a home flip as they once were able to do. 

Also, iBuyers aren’t just competing against each other for homes from sellers that are prioritizing quickness and convenience. The number of cash buyers has reached the highest level since 2013, and instead of being able to demand lower prices and other contingencies for a cash offer, buyers and iBuyers paying in cash are now paying well above the value of the home in order to make the purchase.

Another reason home flips aren’t as profitable anymore is that margins are tight, and the increasing cost of renovations is severely affecting investors. Add in shortages, supply chain disruptions, and other factors slowing the flow of construction and renovation, and flippers and iBuyers may be seeing that they have to hold on to the home longer, which eats into their already slim margins.

Zillow Offers claims that it purchased over 3,800 homes in the second quarter of this year, so the program obviously was popular with some sellers, and whether pricing, inventory backlog, construction woes, or other operational concerns were cause for its recent announcement, the news did make some in the industry stand up and take notice. 

What Should Sellers Do?

There has always been a trade-off between the ease and convenience of offloading property with an iBuyer like Zillow, RedfinNow, or OfferPad, but to realize the maximum possible equity in your home, LIST WITH ELIZABETH® has always recommended that you select a real estate professional in your area that can advise you about your home’s fair market value, the costs involved in a sale, and other factors affecting the home selling process in this unique time in our history.

Whatever the circumstances of your home, and regardless of what’s going on in the real estate market at any given time, a real estate professional will be committed to working with you, and can take away many of the hassles that may have caused you to consider selling to an iBuying program in the first place. 

Because home values are among the highest seen and demand continues to skyrocket, you owe it to yourself to see how you may benefit from the conventional home sales process, and LIST WITH ELIZABETH® wants to help you in every step along the way. Contact us to learn more about how we sell homes like no other agent in town!