Image: Michael Tuszynski | Unsplash
This did not work out as hoped.

Zillow, a company best known for being an online real estate marketplace, is shutting down its IBuying division, known as Zillow Offers, resulting in the lay off of 25% percent of the company’s employees.

Zillow Offers began to struggle in the last few weeks, pausing operations. The CEO Rich Barton announced recently in the company’s third-quarter earnings release that “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too many earnings and balance-sheet volatility.” According to Insider, he goes on to say that “While we built and learned a tremendous amount operating Zillow Offers, it served only a small portion of our customers. Our core business and brand are strong, and we remain committed to creating an integrated and digital real estate transaction that solves the pain points of buyers and sellers while serving a wider audience.”

Barton also notes that the most difficult part of the decision is that it will ultimately affect colleagues and it is “not something we take lightly. We are grateful for their efforts, and we are committed to providing a smooth transition.” Originally, Zillow Offers paused its operations after there was a backlog of houses in need of renovating. In addition, an Insider analysis reports that “revealed other issues with the company’s iBuying strategy. Of the hundreds of homes Zillow has recently listed for sale in its five biggest markets, 64% were being marketed for less than the company originally paid for them.” In fact, the numbers are staggering with examples like 93% of properties owned by Zillow in Phoenix were priced below what Zillow originally paid.

Apparently, Zillow is expected to pay a range from $240 million and $265 million in losses. This points to the newer use of instant buying referred to IBuying, which is when tech advanced companies buy homes that outbid other buyers and intend to resell them after renovations are completed. Many thought this to be a good idea that would promise profit, but this obviously did not work in Zillow’s favor.