Zillow, the real estate search and advertising platform, has gotten serious about getting into the home-flipping business: About 41.5% of its revenue came from home sales in the three months ended June 30, according to the company's most recent earnings report.
Zillow generated revenue of $599.6 million in the last quarter, of which $248.9 million came from its housing division, which refers to the “direct sale and purchase of homes.”
The company launched its “Zillow Offers” service in 2018.
Zillow currently buys thousands of properties in 15 markets across the country, invests in minor renovations and then sells them — essentially flipping homes. It plans to be in 26 markets by mid-2020. The company takes a commission from sellers on each of these transactions. The company sold 786 homes and bought 1,535 homes between April and June.
It's not yet a profitable business for Zillow — its housing division lost $71.1 million last quarter — but the company plans to eventually profit from the program by attracting more mortgage customers through these sales (it acquired a smaller mortgage company in November) and by selling referrals to real estate agents as more homeowners express interest in selling their homes to Zillow. The company reported receiving about 70,000 inquiries from sellers last quarter.
It's a big shift from Zillow's original business of real estate search and marketing, and signals a dramatic shift in home flipping from small real estate investors to institutional buyers. Other companies, including Opendoor, Offerpad, Redfin and Knock, are also expanding the so-called instant buyer, or “iBuyer,” market. Zillow expects to buy 5,000 homes per month by 2022.