A change in strategy for the nation’s largest online real estate marketplace could mean good news for Charlotte homebuyers. Zillow has announced it is shutting down its Zillow Offers program, which buys homes ‘as is’ directly from sellers for cash.
The move will effectively cut 25% of its workforce. Not surprisingly, Zillow shares took a hit on the stock market when the news was announced. Zillow attributed the decision to end its flipping program to a backlog of properties, inability to forecast prices accurately, and worker and supply shortages.
iBuyers impact on the market
Zillow wasn’t the first to offer the cash for homes opportunity. Knock, OpenDoor and Offerpad were among the first to hit the market. For sellers, convenience is the biggest selling point of using an iBuyer or instant buyer because it means no need to make repairs or deal with showings. The iBuyer then makes any necessary upgrades and flips them for sale.
A notable result of their participation in the single-family housing market is the rapid rise in prices thus making it much much more difficult for “traditional” homebuyers to compete. The iBuyers were able to come in, purchase with cash, and out-compete many buyers. Now that Zillow is halting their participation in purchasing, this in theory, could allow traditional homebuyers more opportunities in a market with low inventory.
“I think that it is a significant event in the national residential real estate market,” said 5 Points Realty Co-Owner Edwin Wilson Jr. “The power that the corporate iBuyers had, and in some cases continue to have is tremendous. “
2021 has been a wild housing market and iBuyers have strengthened their offers in response. iBuyer offers averaged 104.1% of market value in the first half of the year, according to a report by Zavvie, a real estate technology company.
Are they worth it?
Charlotte has seen its share of these i-services pop up in and around our heated housing market. They are targeted at people who want to sell quickly and without the hassle of negotiations. Of course, 5 Points agents and brokers are watching it from the ground level as we work in the real estate market day to day.
According to 5 Points broker Cassee Cunningham, “There are lots of indications from the ground that i-services just don’t work as well as people, you know real estate brokers, human buyers and sellers. One strong indication we have noticed is properties represented by i-services linger on the market significantly longer. There seems to be a stigma attached.”
Maybe that’s because i-services are less about character and personal service and more about meeting the right numbers. And for Zillow, the numbers aren’t working anymore.
Now what?
Don’t stress if you have a home under contract with Zillow Offers. Zillow said it will go through with any signed contracts in place.
Meanwhile, the company will try to offload a large amount of inventory in places like Phoenix, Arizona mostly at a loss. We will be watching to see if other iBuyers follow suit or adjust.