Zillow Pulls Back on Home Flipping and Seeks to Sell Large U.S. Home Portfolio
Posted on 11/01/2021
Zillow Group Inc. is a real estate information site on homes, gathering data on transactions and publishing estimates known as “Zestimates”. Zillow is now looking to dump circa 7,000 homes and is making a pitch to institutional investors. The estimated price tag is around US$ 2.8 billion. Zillow plans on selling portfolio chunks of single-family homes to a number of buyers. Zillow uses data to make decisions to buy real estate and buys homes in certain zip codes. Zillow recently disclosed it will stop making new offers in its home-flipping operation, also known as iBuying, for the remainder of 2021. Zillow made the decision to layoff 25% of the company as well.
Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. In September 2020, Zillow launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions. Zillow Offers revenue increased by US$ 318.2 million to $772.0 million for the three months ended June 30, 2021 due to the sale of 2,086 homes at an average selling price of $370.1 thousand per home. For the three months ended June 30, 2020, Zillow Offers revenue was US$ 453.8 million due to the sale of 1,437 homes at an average selling price of US$ 315.8 thousand per home.
Zillow lost more than US$ 380 million on the program called Zillow Offers.
In March 2021, Zillow Group, through Zillow Offers, began buying and selling homes through a titling trust. The titling trust facilitates the allocation of beneficial ownership of properties to special purpose entities, which SPEs are then party to agreements to finance the properties. As of June 30, 2021 and December 31, 2020, the total assets of the SPEs and titling trust were US$ 1.3 billion and US$ 551.2 million, respectively. To provide capital for Zillow Home Loans, they utilize master repurchase agreements and a warehouse line of credit. The banks lending the money are Credit Suisse AG, Cayman Islands, Comerica Bank, and Citibank, N.A. Except for certain limited circumstances, the credit facilities are non-recourse to Zillow Group, according to a recent 10-Q report filed to the SEC. In accordance with the master repurchase agreements, Credit Suisse and Citibank, N.A. have agreed to pay Zillow Home Loans a negotiated purchase price for eligible loans.
What is an iBuyer?
iBuyers are real estate companies that buy and sell properties through technology. iBuyers buy homes direct and then sell them directly to the home buyer.