We all know that Redfin and Zillow are the two big players in online home buying. Last year, Zillow had a massive flop and shut down its home flipping business, and it looks like Redfin will follow suit soon.
iBuying, the act of online companies buying homes and flipping them for a profit, seemed like a good deal. How many of us drive down the street every day and see signs advertising rundown homes for top dollar? These people just fix them up and sell them for more. So why wouldn't an online home buying company want to do the same?
Well, they tried, but ultimately failed, and in Redfin's case, it's no longer worth the “money and the risk.” Vice even reports that the company is expecting to lose $22 million this year on the project alone.
This isn't the only financial warning sign facing the company: Redfin's shares have fallen 92% in the last year and have fallen by nearly a third in recent weeks. The company is effectively bleeding cash at this point.
Seeing as Zillows' home flipping project met its timely demise, it was pretty predictable that Redfin would follow suit. Home flipping simply cannot be done at such a large scale and the company would not have survived if it had tried to stay in business. They should have shut down RedfinNow (the project in question) sooner… that would have officially sunk the company.
The bankruptcy of RedfinNow and the housing market downturn forced the company to lay off 13% of its workforce, and so far the company has not seen another way out of its tough financial situation.
Public opinion of both companies has gone up and down over the past few years, but that doesn't matter when it comes to people losing their jobs as companies go under, some of whom could be left in financial debt after just one week of not being able to work.
Both Redfin and Zillow have suffered losses, but will they be able to recover financially and weather the inevitable downturn? We'll have to wait and see.