Skip To Content

What can we learn from Zillow’s iBuyer failure?

I’m sure you’ve seen the many news reports about Zillow’s iBuyer failure in 2021. What are the lessons to learn and market impacts? There are several take-aways of note. To start let’s visit some of the major news stories:

Zillow and its chief iBuying competitors, Opendoor Technologies Inc. and Offerpad Solutions Inc., often sell homes to single-family landlords in the normal course of business. Investors bought roughly 9% of all homes Zillow sold in the first quarter of 2021, Bloomberg previously reported.

I have to admit, when I first heard the news I felt a little “snarky” thinking “they needed a good agent.” However, with more in-depth analysis it’s clear the failure of AI in this venture does not mean we should discount Artificial Intelligence in real estate trends going into 2022.

Two major outcomes we must review;

Dangers of Flipping in a Shifting Market

As much as we can get caught into the sophistication of AI, Zillow’s iBuyer failure aligns with “old school” advise about the risks of flipping homes in a shifting market. When markets shift, house flippers and developers usually get caught first. ARV (after renovation values) estimated at the start of a project are dated to start with, and as markets shift the profit margin can quickly disappear. I’ve advised several new investors who based their plans on past neighborhood shifts to be very cautious about future pricing trends based on dated information.

Hedge Funds Buying Housing Portfolios

New York based investment firm, Pretnium Partners, purchased the first 2,000 homes that Zillow canceled in 20 markets with plans to rent them. This move follows a trend of Wall Street investments in portfolios of properties I’ve learned about through discussions on Clubhouse.

According to industry insiders, we should not discount the use of AI on an institutional level because of Zillow’s failure.

In the past 6 months pre-foreclosure properties been have purchased as portfolios for investment funds based on rental projections. This confuses foreclosure data as these homes won’t show in today’s market as foreclosures. They’re purchased directly from lien holders prior to hitting the market.

We can dig deep on this topic and it’s impact on housing affordability, but for this discussion it’s another use of AI with Wall Street investments, and their impact on our local housing markets. For more insights;

These are examples of complex dynamics that make navigating today’s real estate market a challenge. Let’s talk and go over your personal goals, then strategize on a plan for success in 2022.

Trackback from your site.

Susanna Kunkel

Susanna Kunkel brings her skills from a career in the executive offices of major corporations to her real estate business - treating each client like a VIP. With 18 years of experience as a real estate advisor, you can be confident in knowledgeable, personalized, confidential service. Hear what her clients say -

Leave a Reply


About our blog

Subscribe for Main Line and Center City local news, updates, and in-depth market reports.