Quitting Real Estate - Selling Everything

Let's discuss why Zillow is quitting the real estate marketing, why they're selling over 7000 homes, and whether or not this has the potential to impact the housing market as the Federal Reserve begins to raise rates. Enjoy! Add me on Instagram: GPStephan

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The Zillow iBuyer:

Their goal was to offer a service that makes sight unseen, cash offers in under 48 hours that would be COMPARABLE to what the seller would receive on the open market. Then, they’ll sometimes make a few quick repairs and put the home BACK on the market, ideally - at a higher rate to make a profit.

However, most iBuyer programs are ACTIVELY LOSING MONEY….at an average loss of $40,000 for EACH HOME BOUGHT AND SOLD. Now, Zillow claimed that the homeowners who turn DOWN their iBuyer offer receive an average of 0.09% MORE on their home sale by going the traditional route…but more recently, it was found that iBuyers were not only paying an AVERAGE of 104% of homes market value…but, they were also EXPANDING the areas in which they purchase…leading, of course…to greater losses by the time they put the home back on the market for sale.

Initially, Zillow completely acknowledged that its iBuyer program is unprofitable, and costs them tens of millions of dollars…BUT, they said to “be patient” - and that, it’s all part of their grand plan to transition real estate into an industry where buying and selling is as easy as trading in a car.

Although as it turned out…flipping wasn’t as profitable as they expected….actually, it wasn’t profitable at all…and, they continually LOST money on almost every single flip…to the point where, just recently, they made the announcement that they would be permanently closing down their iBuyer program…and selling off more than 7000 of their homes to stop the bleeding of money.

They blamed “a faulty algorithmic model” for being the root cause of their MASSIVE real estate failure….and they follow that up by saying: "We've been unable to accurately forecast future home prices at different times in both directions by much more than we modeled as possible.”

Or, more simply put: they weren’t able to buy homes, at scale, at a price that gave allowed them to sustainably operate under these current market conditions….or, more simply, simply put: they were paying too much money for homes because their algorithms couldn’t identify a correct price to make money…and that wasn’t going to change anytime soon.

When we really get down to it, we see that their biggest blockage…wasn’t that they thought the real estate market had peaked…but instead, it was because labor and supply shortages made it impossible for them to fix and re-list homes as quickly as they would want.

The problem with the housing market, today - is that supply chain bottlenecks are making it impossible to build more homes, as fast as demand wants it. And the homes that ARE being built NOW COST more to make…so, those costs get passed on to you, as the buyer. Personally, I’m in the train of mind that - eventually - things will HAVE to normalize at some point - but, until then - the housing market could remain higher than normal, and for anyone waiting on the sidelines, my advice is usually the same:

Don’t rush to buy something, until you find the prefect property, negotiate the best you can, plan to keep it at least 7-10 years, lock in a 30-year mortgage at the lowest rate you can…and always, smash the like button.

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For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com

*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/