Zillow has announced that it will stop buying and renovating homes for the rest of the year, citing a backlog of properties as well as worker and supply shortages. “We're operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” said Jeremy Wacksman, the company's chief operating officer, in a statement. “Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory.”
The construction industry has been stymied by both worker shortages and price surges for essential building materials like wood and steel in the wake of the pandemic, causing delays that are still rippling through the sector, affecting even small-scale renovations.
The program, called Zillow Offers, buys homes directly from sellers on the real estate platform before updating them and reselling them. Since it launched in 2018, the program reportedly sold 2,086 homes and now operates in 25 cities. Known in real estate as an iBuyer program, Zillow Offers uses data about a property and the market to make a cash offer on an off-market home and buys directly from the homeowner. The process lets the seller avoid the traditional pains of selling, like finding a listing agent and getting the property ready to show, as well as providing a different timeline—closings typically happen 7 to 90 days after the contract is signed. Competitors in the iBuyer market include Opendoor (the leader in the sector), RedfinNow and Offerpad.
In a note from the company to its shareholders, it was reported that Zillow Offers bought a record 3,805 homes in the second quarter of 2021. “We have not been exempt from these market and capacity issues, and we now have an operational backlog for renovations and closings,” said Wacksman. Zillow said that it would still market and sell homes in its existing inventory through the program, and that it would also continue to buy houses with contracts that have already been signed but have yet to close.
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