Zillow halts home purchase as tech-knocked hits hang

The Zillow Group is taking a hiatus from buying homes in the United States after the online real estate giant’s hub in the tech-fueled home turnaround encountered a problem.

Seattle-based Zillow, which acquired more than 3,800 homes in the second quarter, will stop pursuing new purchases for the remainder of the year as it works on a backlog of properties already in its pipeline.

“We operate in an economy limited by labor and supply within a competitive real estate market, particularly in the construction, renovation and closure of spaces,” said Jeremy Wacksman, director of Zillow’s operation, in a statement. “We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closures.”

The stock has fallen 31% this year through Friday’s close after nearly tripling in 2020.

The company said it will continue to market and sell homes during the acquisitions hiatus and make deals on contracted homes.

“Suspending new contracts will allow us to focus on sellers already under contract with us and our current home inventory,” Wacksman said.

Zillow is best known for posting real estate listings online and calculating estimated home values ​​- known as Zestimates – which allow users to track their home’s value. The popularity of the company’s apps and websites is fueling profits from Zillow’s online marketing activities.

But more recently he has bought and sold thousands of homes in the United States. In 2018, the company launched the Zillow offerings, joining a small group of tech home pinball machines known as iBuyers. In the new business, Zillow invites homeowners to bid on their home and uses algorithms to generate a price. If an owner agrees, Zillow buys the property, makes minor repairs, and puts it back on the market.

With the pandemic triggering a real estate frenzy marked by cash offers and quick closings, Zillow’s speed and convenience has started to resonate with consumers who want to sell their homes quickly as they attempt to purchase a new property.

The iBuying process is powered by algorithms and large pools of capital, but it also depends on humans. Before Zillow signs a contract to buy a home, he sends an inspector to make sure the property doesn’t need costly repairs. After buying a home, contractors replace the carpets and repaint the interiors.

Finding workers for these tasks has been difficult during a pandemic that has stretched the workforce across all industries. Staff shortages have been exacerbated by Zillow’s willingness to let clients set a closing date months into the future, meaning he could agree to buy a house in August and start renovating it in November. .

“Given unexpectedly strong demand, Zillow Offers has reached its home buying capacity for the remainder of the year,” wrote an employee who works in the company’s home buying operations in two. States in an email to a business partner viewed by Bloomberg. .

This is not the first time that the company has suspended its purchases. Zillow stopped buying homes at the start of the pandemic, as did its main competitor, Opendoor Technologies. While businesses have finally capitalized on the real estate boom that began when the first economic lockdowns were lifted, it took Zillow several months to resume home buying at its pre-pandemic pace.

In recent months, Zillow has fought off online controversy and laid the groundwork for speeding up purchases. The company borrowed $ 450 million in a bond offering in August, the first of its kind, and priced a second $ 700 million offering in September.

For now, the company plans to refer potential clients to traditional real estate agents. While the break should help Zillow overcome the backlog, it could lose customers to its competitors, including its main rival.

“Opendoor is open for business and continues to serve its customers with a simple, safe, fast and reliable move,” a company spokesperson said in an email.

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