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Online real estate transactions? This vision is taking a heavy hit
Online real estate giant Zillow, which about two years ago began buying private homes and selling them in the short term (flip), announced that the venture had failed and would close. Following poor quarterly reports, it would lay off 25 percent of the company's workforce:
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Real Estate
Wednesday, 03 November 2021, 08:40 Updated: 09:09
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Every Israeli who has been interested in or purchased real estate in the United States has probably heard of Zillow.
The online real estate site offers information services similar to Yad2 and Madeleine, but in December 2019 opened an interesting division - iBuying, which offers buying apartments online from sellers and Flip - selling them at a higher price soon.
Well - this model did not work. Last night ( Tuesday, Zilo announced that it was closing its home sales division and laying off 25 percent of the company's workforce due to poor quarterly reports and a steady decline.
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The model turned out to be unsuccessful.
Zilo (Photo: ShutterStock)
Zilo's model was interesting. The company offered the apartment owners to sell them the property at record speed - no claims for damages, no meetings with buyers, no realtors, no headaches. All this, of course, at a price lower than market prices. The plan was to sell quickly at a profit. The problem: The "flips" market has proven to be unstable and Zilo is stuck with an inventory of about 7,000 apartments.
Zilo's timing was not good. Two months after the venture opened, the corona burst and the market dried up. However, similar to the situation in Israel, it is strong to soar quickly shortly thereafter. Rich Barton, one of the founders of the company, admitted that the vision of "buy cheap and sell at a profit" within 6 months collapsed, because it is very difficult to predict the value of apartments in such a short period of time with such a small margin for error.
"We decided this field was too dangerous, and the traffic was too meager," Barton admitted, "the logic is clear, but the feeling is hard."
Zilo reportedly needs to sell about 7,000 units for a total of $ 2.8 billion.
The company's stock stood at $ 136 at the beginning of the year, peaked at $ 171 and has since been cut in half - it currently stands at $ 85, and is expected to fall below $ 80 during the trading day.
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