HELENA — Earlier this week, real estate tech firm Zillow announced it was leaving the home-buying business.
The process known as “iBuying” allows homeowners to sell their property without the need of middlemen such as realtors or brokers. In 2018, Zillow planned to invest in “iBuying” through their program, Zillow Offers. Homeowners could quickly get money for their property, and the company would make upgrades and resell the homes.
But it didn’t produce the desired outcome and this past Tuesday, Zillow announced their plan to shut down their home-flipping business. Losses over the last three months totaled around $380 million, and about a quarter of the workforce will be laid off.
According to a report by Bloomberg, homes owned by Zillow, which total about $2.8 billion in value, will most likely be sold to institutional investors.
Helena real estate broker, Andy Onushco, says that the housing market is not as simple as a computer algorithm. He says that Zillow doesn’t have the same personal local touch a real estate agent or broker has.
“They went into this thinking, ‘We can be like Uber; we can build a system that is a marketplace system. We will introduce drivers to passengers through a highly efficient computer network system and we will be wildly successful.’ Well houses aren't arranging transport from point A to point B. So it is a lot more complicated, it is intrinsically local, and it's great to have an agent that knows the neighborhoods and understands local economy. If you're coming to a job on the west side of town, do you really want to live on the east side of town? Yes or no? We kinda help answer those questions that a computer algorithm can’t,” says Onushco.
On its website Zillow lists homes for sale in about two dozen US cities, all of them major metropolitan areas. It’s unclear if the company owns any homes in Montana.
Whether or not “iBuying” will become a more prevalent option in the future has yet to be seen. But as for Zillow, the risk certainly wasn’t worth the reward.