Just weeks after announcing a pause in its iBuying, Zillow Group Inc. is aiming to sell about 7,000 homes for roughly $2.8 billion, a report from Bloomberg stated on Monday.
The real estate giant is pitching the homes to institutional investors and will probably sell to multiple buyers, the report stated, citing individuals familiar with the matter who wished to remain anonymous.
Representatives from the company were not immediately available to comment.
In mid-October, Zillow stated it would pause the purchasing of any new homes through the end of 2021, stating an inability to keep up with demand amid labor and supply issues hindering its renovations and closing processes. However, it would continue to follow through on any preexisting contracts with consumers.
The news of Zillow’s effort to unload thousands of properties also follows reports of the company underpricing homes they had originally purchased for more.
“In my previous analysis, I suggested that iBuyers can get into trouble if they overpay for too many houses in a cooling market,” strategic real estate adviser and tech expert Mike DelPrete wrote in a post for Inman on Oct. 25. “This results in a growing inventory of overpriced houses that are difficult to sell, which is exactly the problem Zillow now faces.”
DelPrete added that Zillow was pricing hundreds of homes it had purchased in Phoenix for a median of 6.2 percent less than what the company had originally purchased them for. “Zillow’s Phoenix inventory is currently priced at a median of $29,000 less than the buy price,” he said. “This is a direct result of price reductions on 182 listings of an average of $41,000.”
But Phoenix isn’t the only market in which Zillow was listing homes at a price reduction — DelPrete’s and other reports noted the issue was noticeably present in Atlanta and Dallas as well.
In other words, Zillow now finds itself in a sticky situation, severely limited in its buying power due to a backlog of jobs, and selling properties at a loss, which is the exact opposite of the goal of the Zillow Offers program (to flip properties at a profit).
By the end of the day on Monday, Zillow shares had dropped by 8.6 percent to $96.61. By the time of publishing, its stock was down to $88.75, according to Yahoo Finance.
The company’s third-quarter earnings will be released later today.
