Zillow Offers is the company's “iBuyer” service that aims to digitize the home-buying experience from start to finish. (Zillow Photo)
Zillow Group said it is making good progress selling its owned homes, announcing today that more than 50% of the homes it had slated for sale as part of its decision to shut down its Zillow Offers business unit have been sold or are under contract to be sold. The Seattle-based real estate company also announced that its board of directors has authorized the purchase of up to $750 million worth of Zillow stock.
Zillow's shares rose in after-hours trading after plummeting 51% over the past six months. The company's market capitalization is now $13.75 billion.
The update comes a month after Zillow Group suddenly decided to shut down its iBuying real estate business, known as Zillow Offers.
“We are pleased with the progress we are making in our wind-down efforts and recognize that discontinuing operations at Zillow Offers will position us for a more capital efficient balance sheet and business moving forward,” Zillow Group co-founder and CEO Rich Barton said in a press release Thursday. “As such, we see today as an opportune time to announce a share repurchase program and reduce the cash balance we have built up to support Zillow Offers.”
Also, given the rapid growth in sales at its iBuying division, Zillow said it now expects fourth-quarter revenue from its Offers business to be between $2.3 billion and $2.9 billion, up from its previous revenue forecast of $1.7 billion to $2.1 billion.
The Wall Street Journal reported last month that Zillow was selling about 2,000 homes it owns to Pretium Partners, which plans to convert the properties into rentals. At the time, the Journal reported that Zillow was looking to sell 9,800 homes it owns and was in the process of buying another 8,200. Those home sales were estimated to be at a loss of 5 to 7 percent.
While Zillow is moving away from iBuying, the process of using algorithms to quickly buy and resell properties, other companies are continuing to work on the model. But prices for Zillow's rivals have fallen over the past month.
Redfin shares fell 16%. Market cap: $4.1 billion. Offerpad shares fell 6%. Market cap: $1.6 billion. Opendoor shares fell 30%. Market cap: $8.9 billion.
Zillow will lay off 2,000 employees, or 25% of its workforce, as part of its exit from iBuying and will also take a $500 million write-down on the business.
Zillow has faced a number of problems with its iBuying business, including a lack of confidence that its algorithms could accurately predict future home price trends, supply chain issues, and an inability to secure contractors to flip homes in a timely and economical manner. An Insider report earlier this week revealed that Zillow pressured employees to find ways to reduce the number of renovations required to flip homes it owns and kept contractor wages low compared to competitors.
Last month, Burton called off the plan.
“Home price unpredictability has far exceeded our expectations and we have determined that continuing to expand the size of Zillow Offers would create too much volatility in our earnings and balance sheet,” Barton said in a statement at the time.
The sudden about-face surprised investors, in part because the company had touted the prospects for iBuying just weeks before the shutdown. It also led to at least one class-action lawsuit alleging that Zillow misled investors about the prospects of its iBuying business.