The Failure Of The iBuyer Business Model

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Sellers who want to avoid the ambiguity of not knowing if or when their home will sell can take advantage of iBuyers' quicker closing options. There is no doubt that iBuyers have offered a pleasant alternative to traditional brokerage for motivated sellers who need to move, possibly a great distance from their current location, and want a predictable sale date. Tech companies uses big data to determine the price at which they think they can sell a property, which then influences their purchase bids. They frequently provide prices that are lower than those of traditional purchasers, but they entice sellers by promising quick, all-cash transactions. Sound good so far? Well, recently, Zillow, one of the leading iBuying company, announced the end of its iBuyer service. But before we go about analyzing what went wrong, here’s a comprehensive timeline of Zillow’s iBuying business model.

In May 2017, Zillow pilots its "instant offers" in Orlando and Las Vegas, allowing homeowners to receive cash offers from "select investors" as well as a market appraisal from regional agents to determine how much the house would be worth on the open market. A year later, in April 2018, the company pivots to start actually buying homes, with this 4-bedroom bungalow in Arizona being the first home the company ever purchased. Around the same time, the company purchased 19 homes in the Phoenix area. According to former Zillow CEO Spencer Rascoff, “At this exciting time in the real estate industry, Zillow Group is committed to developing innovative technology and services, like Zillow Offers and, with today's announcement, potential for mortgage originations, that help our partners meet evolving consumer expectations, while generating more revenue opportunities."

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