by
Business reporter for The Seattle Times
About a month after announcing it was shutting down its failed home-flip business, Zillow said it has sold or is in the process of selling about half of the homes it planned to sell.
Earlier last month, the Seattle-based real estate company announced plans to shut down Zillow Offers, its experiment with algorithm-driven home resales, known as iBuying.
After months of optimistic comments about its business, Zillow executives said homes are taking longer to renovate and resell than expected and that the company's algorithms have failed to accurately predict prices. As a result, Zillow plans to lay off 25% of its workforce.
The stock price fell in the days after the announcement, and the company is now facing two shareholder lawsuits in federal court.
Shares rose about 8% in late trading on Thursday after Zillow said it plans to buy back its own shares, Bloomberg reported. The stock remains down about 60% since the beginning of the year. Zillow plans to buy back up to $750 million worth of shares, about 5.5% of its current market capitalization.
Buybacks could boost stock prices by reducing the number of shares remaining on the market, which would also benefit executives whose compensation is tied to the stock price.
Zillow ended the third quarter with 9,790 homes in stock and 8,172 under contract. The company said Thursday that it has “sold, is under contract to sell, or has agreed to disposition terms for more than 50% of the homes that we had planned to resell throughout our wind-down process.”
Zillow Offers was not buying or selling homes in Seattle, but was active in Portland and other cities. Last month, Zillow sold 2,000 homes in 20 markets to an investment firm that plans to rent them out, according to The Wall Street Journal.
Zillow wrote down about $304 million in homes it expects to lose money on in the third quarter and forecasts an additional $240 million to $265 million in losses in the fourth quarter. As of Sept. 30, the company had $2.9 billion in liabilities related to Zillow Offers.
At the time, the company projected that its home division, which includes Zillow Offers, would bring in revenue of $1.7 billion to $2.1 billion in the final three months of the year. Zillow has now raised that forecast to a range of $2.3 billion to $2.9 billion.
Laying off employees began soon after the announcement last month, with at least 47 people laid off in Washington state so far. Zillow said on Thursday that it expects the “net impact” of the closure of Zillow Offers “will be, at a minimum, neutral to cash flow.”