Zillow as well as OpenDoor and others have been buying homes virtually via a process called iBuying. The process consists of a homeowner entering their address on the iBuying platform, selecting to receive an offer and stipulating their terms. Usually fast escrows, no repairs, no inspections. When iBuying first started, the offers were under market prices, but the homeowners were still agreeing to the sale because it was a hassle-free transaction. Zillow then sold the property at market price on the open market (the MLS) making a profit. This is due to the property being bought under market price with little cost of buying and selling as Zillow owns the escrow and title companies, the lender, the contractors that work on the homes, and pay discounted realtor fees to their listing agents.

However, as the iBuying process gained ground and other platforms emerged, Zillow changed their algorithm to make more aggressive offers to sellers causing it to overpay for homes that later sold for less than Zillow bought them for. This was beneficial to Sellers and at that time I would advise sellers to accept the Zillow offer. But this business model is unsustainable. Zillow has become a victim of their own process, losing more than $380 million in flipping operations in the third quarter of this year. Zillow has not only stopped buying houses as of October of 2021, but it is getting out of the iBuying market all together.

This doesn’t come as a surprise to me. Nothing will ever replace the work that realtors can do for our clients. We are experts on the market and we can analyze the supply and demand using different sources to arrive at an estimated sales price more accurately than any computer program can ever be. And this is coming from a computer programmer.